According to Cointelegraph: The recent fall in Bitcoin's price can be attributed to several causes. A waning bullish momentum, increased volatility, and profit realization by traders seem to have contributed to BTC hitting a year-to-date low on January 15, 2024. Investors in the United States are also gravitating towards institutional investment products following the approval of spot ETFs.
BTC price had a significant surge to $49,000 following the launch of the first spot Bitcoin ETFs on January 11. This initiated a 97% one-week volatility spike in the market, significantly surpassing the October 2023 low. Market volatility might have been fuelled, to some extent, by futures and options markets reaching multi-year highs—with a combined increment of $13.6 billion in volume and the closure of $3.4 billion positions following the spot Bitcoin ETFs' launch.
Notably, sharp movements in the BTC futures market have led to significant liquidations. On January 17, over $27 million of long and short positions were liquidated, with $19.5 million as Bitcoin long liquidations contributing to a majority of the figure. When BTC longs are liquidated without adequate buying pressure from traders, Bitcoin's price feels the pinch.
Additionally, trading volumes for BTC have seen a steep fall of over $12 billion from the peak of $21.2 billion on January 10. This drawdown occurred even as spot Bitcoin ETFs recorded three times the daily volume of all institutional ETFs launched in 2023 combined on January 16, surpassing $10 billion in a 3-day span.
Another concern is the growing number of short-term holders, as many long-term holders seem to be profit-taking and de-risking—75,000 Bitcoin holdings went down from the all-time high set in November 2023. With lower trading volumes and a rise in short-term holders, Bitcoin's price may potentially see further decreases.
It is noteworthy, however, that Bitcoin's price remains susceptible to macroeconomic events, regulatory actions, and the Federal Reserve’s monetary policy. Yet, many market participants remain optimistic about BTC's long-term prospects as more financial institutions continue to embrace Bitcoin.
