Cryptocurrencies Experience Decline as Bitcoin Drops to $40,000
Bitcoin and other cryptocurrencies saw a decline in value on Thursday, with Bitcoin dropping back to $40,000. According to Coin Metrics, Bitcoin was trading 3.6% lower at $41,167.14 and fell to its lowest level since December 18 at $40,601.37. Ether, which had been performing well while Bitcoin struggled, also experienced a drop of 3% to $2,448.41. The rest of the crypto market followed suit.
Impact on Crypto-Related Stocks
The decline in Bitcoin’s value also affected stocks related to the crypto industry. Coinbase and Microstrategy ended the trading day down by 7% and 2% respectively. Miners CleanSpark and Marathon Digital lost over 6% each, while Riot Platforms fell 5% and Iris Energy retreated by 8%.
The Post-ETF Launch Correction
Julio Moreno, head of research at CryptoQuant, stated that the market is still undergoing a correction following the launch of ETFs. Short-term traders and large Bitcoin holders are selling their holdings due to a risk-off attitude prevailing in the market. Additionally, sellers have not reached the point of exhaustion as unrealized profit margins have not fallen enough.
Signs of a Bottoming Price
Moreno mentioned that the unrealized profit of short-term holders has fallen from 48% in December to about 16% this week. However, for a bottom in the price of Bitcoin to be officially called, it may need to fall below 0%. Moreover, the flow of Bitcoin to derivative exchanges has stopped growing, which has historically signaled bear markets or price corrections.
Predictions for Bitcoin’s Future
Bitcoin has declined approximately 12% since the approval of Bitcoin ETFs by the U.S. Securities and Exchange Commission on January 10. Analysts warn that while the long-term uptrend remains intact, there is still potential for further decline. Rob Ginsberg from Wolfe predicts a disappointing first quarter for the cryptocurrency and Julio Moreno previously projected a potential drop to $36,000.
Closing Thoughts
Bitcoin and other cryptocurrencies experienced a decline in value, with Bitcoin falling back to $40,000. This decline also impacted stocks related to the crypto industry. The market is currently undergoing a correction following the launch of ETFs, with short-term traders and large Bitcoin holders selling their holdings. Signs such as falling unrealized profit margins and stagnant flows to derivative exchanges indicate a potential bottoming price. However, analysts warn that Bitcoin may still have further to fall.
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