Bitcoin’s price has crashed 15% within seven days. Not only is Bitcoin falling, but altcoins are also losing value. Hive has touched its all time low of around $0.05. Why is this happening?
The first reason is institutional selling. Institutions accumulated a large portion of Bitcoin, and now they are taking profits. They were always going to sell at some point, so this is not surprising. You may not be happy with this comment, but it is a truth that apart from making money, Bitcoin has very limited practical use.
U.S. job data shows strong job growth. That means the U.S. Federal Reserve is unlikely to cut interest rates, because it fears that increased employment could fuel inflation. Higher interest rates reduce liquidity in the market, and that’s why big players are pulling liquidity out of the crypto market. What an irony that increase in jobs is not welcoming for the markets!
In my view, another major factor is the upcoming mega IPOs of companies like SpaceX. Big investors need capital to participate in these IPOs, so they are dumping cryptos to free up liquidity. This is sector rotation. This, I believe, is the main reason behind the current crypto market decline. It also suggests that the market may fall further.
In this situation, investors need to be careful before investing in cryptos. Buying on dip may be a loss making activity.
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