Cryptocurrency market witnessed a tumble on Thursday, led by a notable decline in Bitcoin, which fell back to the $40,000 level. This downward movement has impacted not only major cryptocurrencies but also related stocks and has raised concerns among investors.
Bitcoin and Ether Lead the Decline:
Bitcoin, the flagship cryptocurrency, experienced a 3.6% decline, trading at $41,167.14, according to Coin Metrics. The dip pushed Bitcoin to its lowest level since December 18, reaching $40,601.37 at its lowest point. Ether, which had shown resilience in recent days, also fell, experiencing a 3% drop and reaching $2,448.41.
The broader cryptocurrency market followed suit, reflecting a general downturn in the sector.
Impact on Crypto-Related Stocks:
The decline in cryptocurrencies had a ripple effect on stocks associated with the crypto market. Coinbase and MicroStrategy, key players in the industry, ended the trading day down 7% and 2%, respectively. Mining companies, including CleanSpark and Marathon Digital, witnessed losses exceeding 6%, while Riot Platforms and Iris Energy saw declines of 5% and 8%, respectively.
Market Analyst Insights:
Julio Moreno, Head of Research at CryptoQuant, provided insights into the market correction, stating, “We are still in the correction post-ETF launch.” He attributed the ongoing sell-offs to short-term traders and significant selling by large Bitcoin holders amid a risk-off sentiment. Moreno highlighted that unrealized profit margins have not fallen enough to indicate exhaustion among sellers.
The unrealized profit of short-term Bitcoin holders fell to about 16% this week from 48% in December. However, Moreno suggested that a further decline below 0% might be needed to officially signal a bottom in Bitcoin’s price.
Furthermore, Moreno pointed out that Bitcoin flows to derivative exchanges have stopped growing, a trend that has historically signaled bear markets or price corrections.
Post-SEC ETF Approval Impact:
Bitcoin’s recent decline of about 12% follows the approval of Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) on January 10. Despite the long-term uptrend remaining intact, chart analysts caution that Bitcoin could have further to fall. Rob Ginsberg from Wolfe suggested that this downturn could be the start of a challenging first quarter of the year.
Moreno, in a previous projection, anticipated that the post-ETF decision correction might lead Bitcoin to drop as low as $36,000.
Bitcoin is down approximately 3% since the beginning of the year, following an impressive 157% gain in 2023.
