Author: 636Marx
In the past 24 hours, the digital market has seen forced liquidations amounting to $2.868 million, with BTC dropping to a low of $68,830, and a total of 93,788 accounts being liquidated. The largest liquidation occurred on Binance, involving a BTC contract worth $11.25 million.
The key factors leading to the decline in BTC are complex and difficult to grasp comprehensively, as they are sudden and hidden. They can be categorized as: macroeconomic conditions, changes in market sentiment, and technical analysis. Technical analysis is the easiest and least convincing means of understanding the market.
1. Bearish Signals in the Charts
Contract traders often rely on technical indicators to predict BTC's price movements. Before the recent decline, multiple indicators showed signs of weakening upward momentum in BTC, including low trading volume, negative divergence in the Relative Strength Index (RSI), and inconsistent momentum signals in the Moving Average Convergence Divergence (MACD).
2. Low Trading Volume
Despite the strong price performance of BTC in recent months, the change in trading volume has been limited. Typically, a robust uptrend is accompanied by higher trading volume, as more traders participate in the trend. When prices rise without a corresponding increase in trading volume, it usually indicates limited investor participation, which may mean the price lacks the necessary support to sustain the uptrend. This low trading volume suggests moderate buying pressure, laying the foundation for BTC to ultimately break below $70,000.
3. RSI and MACD Signals
The RSI indicator, a momentum oscillator, has shown a bearish divergence with BTC's recent highs, suggesting that buying momentum is waning. Bearish divergence refers to the RSI declining while the price continues to rise, indicating potential selling pressure. In the case of BTC, the RSI has dropped from 76 in March to 59.90, signaling potential selling pressure.
The MACD indicator provides conflicting information in terms of assessing the trend. The monthly MACD shows positive growth, while the histogram displays a downward trend, suggesting that the bullish momentum in BTC may be weakening.
While these indicators alone are not conclusive, their consistency signals the presence of downward pressure on BTC.
4. The Role of Altcoins in BTC's Decline
BTC and altcoins typically move in sync during strong market rallies. However, the recent BTC rally appears to be a lone effort, with many major altcoins not experiencing the same upward momentum. This divergence serves as another warning sign, suggesting that BTC's rally may lack broader market support. History has shown that when BTC rallies while altcoins do not follow, the rally is less likely to be sustained and may face sudden reversals.
During bull markets, the activity of other digital currencies often supports BTC, amplifying the overall bullish sentiment in the market. Therefore, the lack of growth in digital currencies has exacerbated the fragility of BTC, leading to a more imbalanced market environment.
5. Inflation and Interest Rates
Global high inflation rates have forced central banks, particularly the Federal Reserve, to tighten monetary policies. As interest rates rise, increasing borrowing costs, the appeal of speculative assets like digital currencies is reduced. In this context, traditional financial instruments (such as bonds) become more attractive relative to high-risk assets (like BTC). The risk of further rate hikes to combat inflation has led some investors to reduce their digital currency holdings, contributing to the decline in BTC prices.
6. Limited Investor Participation
Despite the recent BTC rally, it has not reflected widespread market participation. The current rally has been primarily driven by large institutional investors, rather than retail traders. The involvement of institutional investors can sometimes lead to short-term price increases, as the big players control a significant trading volume. When these investors withdraw or reallocate their assets, it can cause sudden price drops.
The limited participation of retail investors has led to an imbalanced market, where BTC has experienced growth spurts within the ecosystem but lacks sustained support.
7. BTC's High Leverage and Forced Liquidations
Another factor impacting the decline in BTC prices is the widespread presence of leveraged positions in the crypto market. Leverage allows traders to amplify potential gains, but it also increases risk. When prices drop rapidly, highly leveraged positions may face automatic liquidation, further exacerbating the decline.
According to market data, in severe downturns, approximately 95% of long positions may be liquidated. This liquidation spiral effect can trigger a chain reaction, leading to rapid sell-offs that intensify the downward trend. This can cause prices to break through critical support levels, triggering more liquidations and further overall price declines.
8. Fear and Speculation at High Prices
Market sentiment plays a crucial role in the digital currency realm, and BTC, like other digital assets, is highly susceptible to changes in investor sentiment. During the recent rally, optimism drove BTC prices close to $73,000. However, as the price showed signs of weakness, fear and doubt have resurfaced, prompting investors to lock in profits and withdraw from the market.
The Author's Reflection: Will BTC Rise or Fall?
BTC's recent price drop below $70,000 reflects the interplay of multiple factors. The author remains optimistic:
Potential for Rebound:
If macroeconomic conditions stabilize and market sentiment improves, BTC could experience a quick rebound, as long as it does not rapidly drop below $65,000. BTC's long-term narrative as an inflation hedge and store of value remains attractive, especially as institutions gradually increase their investment allocation.
Pressure from the U.S. Election:
The current U.S. election, with Trump leading, is a source of pressure for the crypto market, particularly in key markets like the U.S. and the EU, which may exert persistent downward pressure. The policy of the new Harris administration, which may restrict speculative behavior and limit price appreciation.
In summary, BTC's recent drop below $70,000 reflects its sensitivity to various influencing factors. From technical indicators to macroeconomic forces, regulatory developments, and market sentiment, each element intertwines to impact BTC's price.
The author is confident that BTC's core position in the financial realm is firmly established, and it will remain a focus of innovation and speculation in the coming years.
