Today we close the day with news that nobody likes: Bitcoin fell by around 5%, reaching around $91,800 at around 18:00 BOG/LIM/Quito. And it was not the only one, because the crypto market in general also suffered. But why did this happen? Let's chat a little about the reasons, without complications, as if we were having a coffee and talking about crypto.

First, some quick background: Bitcoin was born in 2009 as a decentralized alternative to the traditional financial system. Since then, it has seen epic rises and falls, and today we are seeing one of those corrections. But don’t worry, because this is part of the game. Now, let’s get down to business.

Macroeconomic Factors: The world outside of crypto

  1. The Federal Reserve (Fed) and interest rates:
    Inflation in the United States is higher than expected, and the Fed has decided to maintain a tough stance on interest rates. This reduces liquidity in the markets and causes investors to shy away from higher-risk assets, such as cryptocurrencies. In other words, money becomes "more expensive" and people prefer to be more conservative.

  2. International trade tensions:
    Remember when Donald Trump announced tariffs on Canada, Mexico, and China? Well, that created uncertainty in the markets. Investors fear that these measures will increase inflation and prolong restrictive monetary policies, negatively impacting cryptocurrencies.

  3. Capital outflows in Bitcoin ETFs:
    In the last week, Bitcoin exchange-traded funds (ETFs) recorded capital outflows of $415 million. This indicates that institutional demand is decreasing, which puts downward pressure on the price.

Technical Factors: What the charts say

  1. Selling by miners:
    Bitcoin miners have been selling more than usual, likely to cover operating costs and prepare for the upcoming halving. This increases the supply in the market and contributes to the price drop.

  2. Support and resistance levels:
    In technical analysis, supports and resistances are key. Bitcoin lost some important supports, triggering more sales. Now, investors are watching the next key levels to see if the price stabilizes or continues to drop.

  3. Elliott Wave Theory:
    According to this theory, markets move in cycles of five impulsive waves and three corrective waves. The current drop could be a corrective wave within a broader bullish cycle. In other words, this could just be a "breather" before the market resumes its upward trend.

  4. Bollinger Bands:
    This indicator shows whether the price is overbought or oversold. Currently, Bitcoin is near the lower band, which could indicate a possible upward reversal in the short term.

What can we expect?

Today's drop is the result of a combination of macroeconomic and technical factors. It is not the end of the world, but rather part of the natural volatility of the crypto market. The important thing is to stay calm, analyze the signals well, and make informed decisions.

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