Bitcoin price has dropped by more than 25% in the past three weeks. Yesterday, the BTC price moved below $30,000 for the second time this month. It is now trading at $31,215, bringing its market cap to more than $586 billion.
Why Bitcoin price has slumped: There are five primary reasons why the BTC has dropped in the past few weeks. First, it is because investors have started to take profit after the currency jumped by more than 800% from its lowest level in 2020.
Second, some Fed members have started to talk about the tightening of the monetary policy. In speeches last week, Raphael Bostic and Richard Kaplan said that it was necessary to start tightening earlier than expected.
The recent price action in Gamestop, Blackberry, AMC, and Nokia has led many to blame the Fed for creating asset bubbles. Therefore, there is a possibility of hiking or tapering late this year.
Third, as I noted early this week, there are concerns about institutional demand in the market. I quoted a report by JP Morgan. The analysts cited the waning inflows to the Greyscale Bitcoin Trust. In a report yesterday, Scott Minerd of Guggenheim Partners reiterated this, saying:
“Right now, the reality of the institutional demand that would support a US$35,000 price or even a US$30,000 price is just not there. I don’t think the investor base is big enough and deep enough right now to support this kind of valuation.”
Fourth, the Bitcoin price has dropped because of the soon-to-be-unveiled ETF. It has led more people to dump the Greyscale Trust in anticipation of the ETF because of costs. The ETF is usually cheaper than Greyscale.
Bitcoin price technical
The fifth reason why the BTC price has slumped is related to its technical performance. The chart below shows that the currency has formed a descending triangle pattern whose support is at $28,708. This arrangement is usually bearish and tends to signal that bulls are being outmaneuvered. Therefore, in the near term, I suspect that a drop to $25,000 will be likely.
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BTC price technical chart
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