Bitcoin is being weird again. Last month, it touched a new all-time high of nearly $74,000 per coin. Now, after having dropped hard and fast, the biggest digital coin is trading for $61,655.
One definition of a bear market is an asset priced 20% lower than its most recent high. CoinGecko data shows that BTC is currently more than 18% off the new top it hit in March.
Does that mean we’re edging toward a bear market just weeks after being in a bull market? Is that possible?
Rather than poking the bear, experts told Decrypt that Bitcoin is currently in a consolidating market: one where there is indecisiveness among investors and an asset neither continues nor counters a long-term trend.
As for why? War certainly isn’t helping. Bitcoin took a hit this past weekend—just before a geopolitical event shocked the markets.
Things looked rosy Friday morning Eastern Time when the coin was priced at nearly $71,000. But then the Wall Street Journal reported Iran was planning an attack on its arch nemesis.
The liquidation of hundreds of millions in short positions the same day was compounded when Tehran actually went ahead and launched a wave of 300 drones and ballistic missiles at Israel.
Head of research at CoinShares James Butterfill told Decrypt: “There are several factors influencing the down turn in prices: tax harvesting in the U.S. is one, while the other is clearly the Middle East crisis.”
“This was expected to push down prices—as it will push up inflation due to rising oil prices, suggesting [interest rates] will remain high,” he added.
Despite being described by some investors as a safe-haven asset, Bitcoin has typically moved along with “risk-on” assets—those that jump up and down in value. When there is geopolitical risk, investors tend to avoid riskier assets and instead put money into more stable ones like gold.
Analysts at CryptoQuant told Decrypt that “investors have pulled back from Bitcoin in anticipation of the upcoming halving and “might be waiting out the geopolitical tensions in the Middle East before re-engaging with the market.”
Meanwhile, Bitcoin at the weekend will undergo a major change to its code: the halving. The event will slash miner rewards in half, in turn reducing the amount of coins unloaded on the market.
The last event was in 2020—and before it occurred, the market also experienced significant volatility, CryptoQuant research shows.
Blockstream CEO Adam Back shared his take today, noting in a Twitter thread that the current volatility is normal—“if anything this pre-halving run-up has been lower volatility than prior cycles bull-runs.”
zoom out, #bitcoin at prices seen 4 weeks ago and 6 weeks ago. plus half a dozen > -30% dips are typical for a bull run. we’re at -19% from ATH a few days before halving, with a never before seen second ATH pre-halving and ETF tail wind gathering. pic.twitter.com/bbZL8ulKqu
— Adam Back (@adam3us) April 17, 2024
In other words, Bitcoin’s weird behavior is mirroring what it usually does every four years.
Edited by Ryan Ozawa.
