There has been a decline in Bitcoin that few predicted. An expert trader at Binance clarifies this tendency, arguing that it has to do with how the market behaves.
As the price of bitcoin rises, a lot of traders start to shift from their typical buying and selling locations. Rather, they use borrowed funds to gamble on highly volatile meme currencies in an attempt to chase after popular coins, which can fluctuate on a daily basis.
When prices go up and on-chain/perps start moving people don’t need slots any more, they can just long the memecoin du jour on leverage.
— Tree (@Tree_of_Alpha) March 18, 2024
What Are The Factors Pulling Bitcoin Price Down?
Bitcoin is down today due to several factors impacting the cryptocurrency market. The price of the top crypto dropped 7% to as low as $62,400 on March 19, with a broader market correction reinforcing BTC’s resistance at the $68,000 level.
This decline was triggered by Bitcoin falling below $63,000, leading to a marketwide sell-off that saw the global crypto market capitalization drop 8% over the past 24 hours to rest at $2.4 trillion.
Additionally, more than $640 million worth of BTC flowed out of Grayscale’s spot Bitcoin ETF GBTC on March 18, contributing to a net outflow from spot BTC ETFs to $154 million.
BTCUSD currently at $62,776. Chart: TradingView.com
The market uncertainty, cooling of the recent bull run, and large-scale Bitcoin ETFs have also played a role in the decline. Long liquidations in the crypto futures market and a different market cycle have further driven the crypto market lower, with over $149 million in long positions being liquidated across the crypto market in the past 24 hours
Rush To Memecoins Threatens BTC Stability, Analysts Caution
Meanwhile, investors seeking quicker profits are rushing into volatile meme coins, potentially hindering the growth of established cryptocurrencies like Bitcoin, according to industry analysts.
The surge in meme coin buying coincides with rising prices for major cryptos like Bitcoin. However, this excitement for potentially explosive returns in meme coins may be causing neglect for the core market.
Analysts warn that the use of leverage, where investors borrow money to magnify their buying power, is prevalent in meme coin purchases. While this can amplify gains, it also significantly increases the risk of substantial losses.
This shift in investor focus away from Bitcoin could lead to a decrease in its buying pressure, causing its price to stagnate or even drop.
Technical analysis of Bitcoin’s price chart indicates a current lack of confidence in a near-term upswing. Key support levels around $56,260 and $51,802 could prevent a steeper price fall.
If Bitcoin can overcome resistance around $64,000, it might signal a return to its recent highs. Otherwise, the price could see a sustained drop or extended period of stagnation.
While meme coins offer the allure of high returns, investors should be aware of the associated risks and the potential impact of their choices on the broader cryptocurrency market.
Featured image from Chris Munnik/Pexels, chart from TradingView