Why Is Bitcoin And The Crypto Market Down Today?
3 min read
Bitcoin price continues to fall, dragging the broader crypto market down with it. BTC is down 4.52% in the last 24 hours, while ETH is down 4.10%. With a current price of $26,289, Bitcoin records its lowest value since March 14 this year, when the price dipped as low as $26,544.
Why Is Bitcoin And Crypto Down?
As always, the reasons for the deep pullback of the Bitcoin price are complex. Remarkably, there was actually good news on Wednesday, May 10, as the CPI continued to fall causing the Bitcoin price to rise as high as $28,317.
However, then fake news about an alleged sale of 9,800 BTC by the U.S. government shook the market. The Bitcoin price flash crashed as a result and has seemingly not been able to recover since. But this narrative is only half the story.
A variety of other factors are currently weighing on the crypto market: the dollar index (DXY) is currently experiencing a bounce and was recently able to hold above the historically important support, the liquidity issue intensified once again with the departure of US market makers Jump and Jane Street, BTC formed a (supposed) head and shoulders pattern in the 1-day chart, the congestion of the Bitcoin and Ethereum blockchains and last but not least a lot of FUD (US government selling, Binance US and Grayscale).
Not surprisingly, uncertainty in the Bitcoin and crypto market is currently quite high. The Dollar Index (DXY) is currently hovering above historically crucial support at 101.8. Since early April, DXY has already been suspiciously close to support, but has so far been able to fend off any attack from the bears.
As Christopher Inks of Texas Wet Capital writes, the DXY saw another move higher yesterday (to 102.056) and is currently preventing a rally in risk assets:
The $DXY rally is making longs difficult this morning. So, if you’re trying to get long on risk-off assets it’s best to wait and watch for a bit.
Liquidity Issues, A Bearish Chart Pattern And FUD
Another bitter blow to the crypto market on Tuesday was the news of Jump and Jane Street’s departure from the U.S. crypto market. The move by the two major market makers comes as a result of regulatory uncertainty in the US.
As NewsBTC reported, liquidity has been a huge problem before, which could now get worse. Due to low liquidity, higher volatility is likely as larger buy and sell orders move the market faster.
In addition, a (supposed) head and shoulders pattern on Bitcoin’s 1-day chart is currently causing fear among traders. The pattern may signal a crash to $25,000.
A clean H&S reversal pattern that could send #Bitcoin to $25k or lower in no time.
2D time frame. pic.twitter.com/FllMuJZlQP— PROFIT BLUE (@profit8lue) May 6, 2023
Adding to the uncertainty has certainly been the congestion of the Bitcoin blockchain by Ordinals and the controversial BRC-20 meme coins, which are seen as a DDoS attack by part of the community. Although 300,000 transactions are still waiting for confirmation in the mempool, the problem is slowly easing.
The popularity of Bitcoin Ordinals transactions is declining. Trading volume has dropped for three consecutive days after reaching an all-time high of $18.13 million on May 8. Yesterday, trading volume fell to $4.86 million. The number of transactions has also dropped from 17,000 to 6,000. UniSat’s market share has dropped from 80-90% to 50-60% currently.
#Bitcoin block size war 2.0?
? According to Dune data, transactions through Unisat have grown exponentially since the beginning of May.
? Unisat, the core wallet of BRC20, is developed by a Chinese development team of the BSV community. pic.twitter.com/DfW46mbhZb
— Jake Simmons (@realJakeSimmons) May 11, 2023
Last but not least, there are currently some unconfirmed rumors (FUD) circulating about Binance US and Grayscale. Binance US caused a stir in the last few days because the Bitcoin price showed a high price premium. The reasons have been the subject of much speculation.
Grayscale is currently being hotly debated because DCG supposedly owes bankrupt crypto lender Genesis Trading about $575 million in May, with the loans coming due next week. The rumor says that Grayscale may be selling something on Coinbase to cover the capital needed to repay the loan.
At press time, the Bitcoin price stood at $26,289, initially receiving support from the 100-day EMA.
Featured image from iStock, chart from TradingView.com
