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The price of bitcoin continues to fall, dragging the broader cryptocurrency market with it. BTC is down 4.52% in the last 24 hours and ETH is down 4.10%. With a current price of $26,289, Bitcoin is recording its lowest value since March 14 this year, when the price dropped to $26,544.
Why did bitcoin and cryptocurrencies fall?
As always, the reasons behind the deep pullback in Bitcoin price are complex. Notably, there was some really good news on Wednesday, May 10, as the CPI continued to fall, pushing the price of bitcoin up to $28,317.
However, then fake news about the alleged sale of 9800 BTC by the US government rocked the market. As a result, the price of bitcoin collapsed and has apparently not been able to recover since. But this story is only half the story.
A number of other factors are currently weighing on the cryptocurrency market: the dollar index (DXY) is currently bouncing and has recently been able to hold above historically important support, the liquidity problem has escalated again with the departure of US market makers. and Jane Street, BTC has formed a (supposed) head and shoulders pattern on the 1-day chart, Bitcoin and Ethereum blockchain congestion, and last but not least, a lot of FUD (USG selling, Binance US and Grayscale).
Not surprisingly, the uncertainty in the Bitcoin and crypto market is currently quite high. The Dollar Index (DXY) is currently hovering above the historical support at 101.8. Since the beginning of April, DXY has been suspiciously close to support, but so far it has been able to repel any bear attack.
As Christopher Incks of Texas Wet Capital writes, the DXY rose even higher yesterday (to 102,056) and is now holding back the rally in risky assets:
The $DXY rally this morning makes buying difficult. So, if you’re trying to go long an asset without risk, it’s best to wait and see for a while.
Liquidity problems, bearish pattern and FUD
Another strong blow to the cryptocurrency market on Tuesday was the news of the departure of Jump and Jane Street from the US cryptocurrency market. The actions of the two main market makers are caused by regulatory uncertainty in the US.
As NewsBTC reported, liquidity used to be a huge problem, which can now get worse. Due to low liquidity, higher volatility is likely as larger buy and sell orders move the market faster.
In addition, the (alleged) head and shoulders pattern on the 1-day Bitcoin chart is currently causing concern among traders. The pattern could signal a crash to $25,000.
Remember the bearish diamond pattern that everyone was shilling at 21-22k?
It’s H&S now, just saying! https://t.co/2HlUIZ1XrJ pic.twitter.com/yyivuwcF82
— tedtalksmacro (@tedtalksmacro) May 12, 2023
Uncertainty is certainly exacerbated by the flooding of the Bitcoin blockchain with ordinals and controversial BRC-20 meme coins, which are seen as a DDoS attack by part of the community. Although 300,000 transactions are still waiting to be confirmed in the mempool, the issue is being gradually resolved.
The popularity of Bitcoin Ordinals transactions is declining. Trading volume fell for three consecutive days after hitting an all-time high of $18.13 million on May 8. Yesterday, trading volume dropped to $4.86 million. The number of transactions has also decreased from 17,000 to 6,000. Currently, UniSat’s market share has fallen from 80-90% to 50-60%.
#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 unconfirmed rumors (FUD) about Binance US and Grayscale. Binance US has caused a stir in the last few days because the price of bitcoin has shown a high markup on the price. The reasons have been the subject of much speculation.
Shades of Gray is currently hotly debated because DCG allegedly owes bankrupt cryptocurrency lender Genesis Trading about $575 million in May, with the loans due next week. There are rumors that Grayscale may be selling something on Coinbase to cover the capital needed to pay off the loan.
At press time, the price of Bitcoin is $26,289, having initially received support from the 100-day EMA.
BTC price falls deeper, 1-day chart l Source: BTCUSD on Tradingview.com