The Reasons Behind Today's Decline In Bitcoin's Price

Today, the downward movement in Bitcoin's price is attributed to several macroeconomic factors that are exerting pressure on BTC bulls.

Source: www.trthaber.com

Bitcoin experienced a 6.2% decline within a 24-hour period, failing to sustain prices above $72,500 on April 8, resulting in a drop to $68,230 on April 9. This movement triggered the liquidation of leveraged long positions totaling $40 million, a seemingly modest sum, yet sufficient to test the $69,000 support level. Pinpointing the precise causes of this volatility is challenging, but three primary factors seem to have subdued buyers' enthusiasm inflows into Bitcoin spot exchange-traded funds (ETFs), macroeconomic trends, and a cautious outlook on technology stocks.

The 63% Surge In Bitcoin's Value Might Be Attributed To Heightened Expectations Surrounding The Upcoming Halving Event

Despite several unsuccessful attempts to close above $72,000 in the past two weeks, Bitcoin remains a standout performer in 2024, with a 63% year-to-date increase. By comparison, the S&P 500 rose by 9% over the same period, while gold reached a historic high of $2,365 on April 9, marking a 14% increase.

This context suggests the onset of a natural profit-taking phase, often termed an accumulation phase. The current absence of strong bullish momentum doesn't necessarily indicate a trend reversal but rather a period of consolidation, as investors await further signals before increasing their investments. The anticipation surrounding the Bitcoin halving has occasionally resulted in overly optimistic expectations. Although this event historically has had a positive impact on Bitcoin's price, it's essential to note that it has only occurred three times in the past 15 years.

Outflows from Bitcoin ETFs and US CPI Inflation Restrict BTC's Growth Potential

Recent events have ignited debates among critics and led some investors to rethink their investment strategies in Bitcoin. A notable incident was the movement of 6,200 Bitcoin by Grayscale on April 9, worth over $434 million. This move is significant given that Grayscale oversees 322,697 Bitcoin and charges a 1.5% management fee— a figure that is substantially higher than its competitors. This has led to a decrease in Bitcoin investments, introducing a level of uncertainty regarding its future price trajectory.

In terms of broader economic factors, there's growing concern among investors as they await the release of the U.S. Consumer Price Index (CPI) for March on April 10. This piece of data is pivotal as it could influence the Federal Reserve's decision to implement three interest rate reductions over the course of 2024. Predictions are pointing to a 3.4% annual rise in CPI, well above the Federal Reserve's 2% inflation target, suggesting an economy that may be running too hot. However, a segment of the market is optimistic, viewing inflation as potentially beneficial for Bitcoin. They argue that Bitcoin's value comes from its fixed and unchangeable supply policy, which could be seen as a hedge against inflation.

Influence of Tech Stock Performance on Bitcoin's Price

The relationship between Bitcoin and technology stocks, particularly semiconductor companies such as Nvidia (NVDA) and AMD, is significant. This connection may arise from the use of GPUs in mining cryptocurrencies or because some global hedge funds consider these assets to be ventures with the potential for high returns but with increased risk. While Bitcoin's market movements don't consistently follow those of the stock market, recent data showed that, over a period of 40 days, there was a correlation of over 80% in the past month.

Bitcoin investors are proceeding with caution, especially after Nvidia's shares fell by 6.2% and AMD's by 7.5% in the first eight days of April. There are growing concerns about Nvidia's financial outlook, prompted by potential decreases in orders from Microsoft and difficulties in obtaining chip supplies from Samsung, as reported by Investing.com. Meanwhile, AMD's dominance in the cloud computing sector poses additional challenges for Nvidia. 

Despite the pessimism surrounding Bitcoin, it's premature to conclude that bearish sentiment dominates. However, the deteriorating macroeconomic climate moderates expectations for Bitcoin's price to hit a new peak before the upcoming halving in April.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.