Bitcoin's trading values approach the $95,000 mark, experiencing a nearly 5% decrease.
Digital currency Bitcoin saw its value slipping close to the $95,000 mark around 8 PM on December 26, following a decrease of almost 5% within a day.
Data from Coinbase, as observed on TradingView, showed Bitcoin dropping to a low of $95,083.93 earlier that day.
The cryptocurrency had been approaching the $99,900 level on Christmas Day, as per further Coinbase records from TradingView.
Consequently, Bitcoin experienced a decrease of approximately 4.8% in such a short time span.
Post a short period of retracement, Bitcoin managed to bounce back somewhat, but was still trading between $95,000 and $96,000 at the time of this report.
The recent slump in Bitcoin has led analysts to look for potential reasons behind this downturn.
Low Trading Volume
A factor that experts kept bringing up was the decreased trading volume, making it easier for Bitcoin to undergo more pronounced price fluctuations.
Tim Enneking, the managing partner of Psalion, shared his thoughts via email.
“Given that Christmas and New Year's fall in the middle of two consecutive weeks this year, we're seeing an extended period of lower-than-usual trading volume,” he said.
“Frequently, low volume leads to higher volatility as smaller orders can exert a disproportionate influence,” Enneking explained.
Alex Lin, cofounder and general partner at venture capital firm Reforge, echoed these sentiments through an email submission.
“This reduction in trading volume is a usual occurrence during this time of year,” Lin acknowledged.
TradingView Glitch
In this environment of reduced trading volume, several analysts pointed to an apparent problem on the TradingView site potentially causing Bitcoin’s recent slide.
Reports from Cointelegraph identified the situation, which temporarily displayed Bitcoin's dominance – its share of the total cryptocurrency market – as zero.
Marc P. Bernegger, cofounder of crypto fund of funds AltAlpha Digital, commented on this scenario via email.
“The recent Bitcoin price decline, down to around $95,000 from near $100,000, appears to have been impacted by a glitch on TradingView,” Bernegger stated.
“This mistake led to the mistaken display of Bitcoin's dominance at 0%, triggering panic among traders and subsequent market volatility. This resulted in substantial liquidations, with about $33 million in Bitcoin longs being liquidated in just a few hours,” Bernegger added.
Lin also pointed out this specific situation.
“There was also an unforeseen glitch on TradingView where Bitcoin's dominance indicator dropped to 0%, which may have encouraged further cash outflows,” Lin stated.
“The panic selling due to the technical error in a low-liquidity environment, amplified by strategic profit-taking after a relatively strong year and major institutional movements of $338 million in BTC ETF outflows on Christmas Eve seem to be the main triggers for the recent retreat within the last 24 hours,” the analyst concluded.
Market Misalignment
George Kailas, CEO of Prospero.ai, offered a different perspective on why Bitcoin's recent price declines occurred, focusing on a shortlist of factors.
“I believe we are witnessing two things here,” he stated via email, the first being “A natural correction on an asset that moved almost as fast in an upward direction as anything could manage.”
“One of the reasons for these wild swings, in my opinion, is the discrepancy between policy expectations without policy,” he explained.
“There has been a major increase in the expectation of an American president more favorable towards Crypto than any we have seen to date,” said Kailas.
“However, these are just expectations, even with a well-founded expectation of policies being quite friendly towards Crypto, the policies have yet to be enacted,” he noted.
“So, there needs to be some degree of potential downside built into some promises not coming to fruition,” the analyst emphasized.
“Furthermore, it will be tough for the market to determine a fair price for the impact of these policies when they are finally implemented,” he concluded.
Disclosure: I personally own some Bitcoin, Bitcoin Cash, Litecoin, Ethereum, EOS, and Sol.
The digital asset Bitcoin, often referred to as digital currency, experienced a significant price drop due to various factors, one of which was the reduced trading volume during the holiday season. Tim Enneking, from Psalion, attributed this decrease in trading volume to an extended period of lower-than-usual trading activity during Christmas and New Year's. Additionally, a glitch on the TradingView site temporarily displayed Bitcoin's dominance at zero, which led to panic among traders and further price fluctuations, potentially contributing to Bitcoin prices dropping below $96,000.
