The cryptocurrency market reeled Monday as Bitcoin price dipped below $40,000 for the first time since December 3rd, 2023. The plunge, which saw BTC shed over 4% in 24 hours and 9% in a month, was attributed to a confluence of factors, including Grayscale’s continued selling of Bitcoin through Coinbase and the unexpected result of the US Securities and Exchange Commission’s (SEC) recent ETF approval process.
The sell-off began shortly after Grayscale, the world’s largest digital asset manager, deposited over $600 million in BTC on Coinbase, which made investors’ total sales $2 billion after GBTC was converted to Bitcoin ETF. This move, coupled with the news that FTX bankruptcy managers had sold their entire 22 million GBTC shares (worth nearly $1 billion), triggered panic among investors, leading to a wave of selling across the crypto market. Some analysts link the Bitcoin price dip with the S&P 500’s all-time-high performance.
The fall in Bitcoin price resulted in long-position liquidations exceeding $56 million for Bitcoin alone and $208.7 million across all cryptocurrencies.
Previously, Bitcoin price dipped below $40,000 on December 3rd, 2023. Since then, it had climbed steadily, reaching a 20-month high of nearly $49,000 on January 11th. This recent crash, therefore, comes as a major blow to market sentiment, raising concerns about a potential extended bear market. Crypto analyst Capito Capital Venture predicts (for the worst case) the $30,000-$34,000 range as a potential support area for Bitcoin if it retraces before the halving.
Analysts like Seth, a prominent trader, highlighted the significance of Bitcoin falling below $40,000, emphasizing the need for it to reclaim this level by producing a “daily close above 40K!” Supporting his anticipation, BTC has shown some signs of recovery, trading at around $40,041.99.
The current market downturn serves as a stark reminder of the inherent volatility of the cryptocurrency space. Investor confidence remains fragile, and any large-scale selling, as witnessed today, can trigger significant price swings. Whether Bitcoin can hold above $40,000 in the coming days and weeks remains to be seen, but the near-term outlook for the flagship cryptocurrency appears uncertain.
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