Why Did Bitcoin Drop 12% This Week?
The price of bitcoin dropped below $26,000 this week amid decreased activity in the market, the growing crisis in China's property sector, and a report that SpaceX has sold at least some of its bitcoin holdings.
Reports from blockchain analytics firm Glassnode and crypto firm Coinshares point to a general lack of interest in the crypto market as a contributing factor to this week's bitcoin price decline. While bitcoin opened the week trading around the $29,400 level, it was down to roughly $25,697 by mid-Friday.
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Notably, the report from Glassnode covered the extreme level of apathy and exhaustion in the bitcoin market on Monday, three days before the majority of the price decline took place. The report also warned, “[O]n a shorter timeframe, it could be argued to be a slightly top heavy market, with many price sensitive investors at risk of falling into an unrealized loss.”
In the report from Coinshares, which was released on Friday, the connection between lower trading volumes on trusted exchanges and increased price volatility for bitcoin was explained.
“In recent months, volatility has decreased, reaching levels comparable to the all-time lows observed at the start of the year,” wrote Coinshares head of research James Butterfill in the report. “Historically, such levels have often marked turning points for significant price swings, either upward or downward," he wrote.
Additionally, Coinshares indicated the sharpness of the decline in the bitcoin price on Thursday night was amplified by the unwinding of a large number of long positions in the bitcoin futures markets on various exchanges.
According to Coinglass data, bitcoin traders liquidated about $1 billion in bets over the past 24 hours alone.
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