Bitcoin price is declining once again, after seeing some recovery on Wednesday due to the reversal in net inflows into spot Bitcoin ETFs. However, just a day later, it appears that the pioneering cryptocurrency has resumed its downtrend, and this post-recovery decline has started a worrying trend. So, what are the factors driving this decline?
Bitcoin price suffers from liquidations
One of the main factors behind the Bitcoin’s Decline These are the main sales that shook the digital asset. These sales are not just made by any investor, but rather large BTC sales orchestrated by large governments.
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One of the main news that shook the space was the fact that the German government started selling currencies. In total, the German government sold around 2,786 BTCwhich was worth around US$140 million at the time of sale.
However, the German government is not the only one that has been selling. News also emerged that the US government had begun transferring Bitcoin seized in the Silk Road crisis once again. On-chain data aggregator Arkham reported that the US government transferred nearly 4,000 BTC from its wallets to the Coinbase exchange.
In total, the US government transferred 3,940 BTC to the exchange, which totaled US$241.22 million at the time of the transaction. This transfer is concerning as coins are usually moved to centralized exchanges such as Coinbase for sale as these trading platforms have greater liquidity compared to their decentralized counterparts.
Has BTC reached bottom?
Although the downtrend appears to have resumed, there are signs that point to the bottom closing. One of these signs is the return of demand to the market. For example, Spot Bitcoin ETFs saw seven consecutive days of departures, which finally changed on Tuesday. Coinglass Data show that between Tuesday and Wednesday, inflows into Spot Bitcoin ETFs exceeded $50 million, ending a brutal week of outflows.
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Another possible indication is the profit and loss margin for investors. This shows how many Bitcoin Investors are currently in profit, and the higher the profitability, the greater the likelihood of a liquidation as investors cash out their positions.
However, profitability levels have fallen, meaning investors are less likely to sell their holdings while waiting for better prices. This usually gives time for demand to build and create a possible recovery point for a recovery.
For now, Bitcoin price is holding steady at the $61,000 support at the time of writing. But if sales resume, then the pioneering cryptocurrency may fall to the $60,000 level soon.
Featured image created with Dall.E, chart from Tradingview.com