The Bitcoin price declined sharply during the overnight session. The BTC price fell to $53,956, which was almost 10% below its highest level last week. It is now trading at $55,600. Its decline helped push most currencies like Ethereum, Ethereum Classic, Tron, and Cardano prices lower.
Why did Bitcoin price drop? There are three main reasons why Bitcoin and other cryptocurrencies declined. First, there are risks that American regulators will start putting in place and enforcing tougher cryptocurrency regulations as the number of ransom attacks rise. This week, hackers attacked Colonial Pipeline, stopping the flow of crude oil and natural gas. Other recent cyberattacks are those that targeted Microsoft and SolarWinds.
Second, investors are waiting for the latest US inflation numbers and statements by some Federal Reserve officials. While the US non-farm payroll numbers disappointed, there is a possibility that the US will publish strong inflation numbers. This could lead to talk of higher interest rates. Historically, Bitcoin and other digital currencies tend to underperform during a high interest rate environment. The third reason is technical.
Bitcoin price technical analysis
The third reason why the Bitcoin price declined is because of the technical arrangement. As my colleague wrote yesterday, and as you can see below, the BTC price had formed a rising wedge pattern. In technical analysis, this is usually a bearish signal. When the price dropped, it reached the 61.8% Fibonacci retracement level. Further, it moved below the 25-day and 50-day moving average.
Therefore, the price will likely rebound, in what is known as a relief rally and then resume the downward trend. As such, we can’t rule out a situation where it drops below the support at $53,956. However, a move above the lower side of the wedge pattern will invalidate this trend.