The cryptocurrency market experienced a downturn today, as the total market capitalization dropped by 2.75% to reach $1.90 trillion on February 21st. This decline has resulted in an increase in Bitcoin’s market dominance by 0.25% to 50.77%, indicating the possibility of further corrections.
Let’s delve into the reasons behind the decrease in Bitcoin’s price.
One factor that may have contributed to this decline is the lack of interest from retail investors. Data from Google Trends reveals that searches for the keyword “Bitcoin” indicate limited interest from retail investors. Despite Bitcoin’s impressive 109% growth over the past year, retail investors remain skeptical.
Furthermore, data from Coinbase supports this observation, as their recent earnings report shows low retail activity in the last quarter of 2023. A closer analysis of the data reveals that retail activity between Q2 2022 and Q4 2023 remained below the statistics from Q4 2020, indicating that retail investors have yet to enter the market fully.
According to the report, retail transactions, which were once responsible for more than 90% of Coinbase’s revenues, now account for less than half of the firm’s net revenue.
Additional data from market intelligence firm Santiment reinforces this narrative, stating that despite the “interest in $BTC in the weeks directly before and after the #SEC’s approval of 11 #ETFs,” there is a lack of “new greed” in the market.
Another contributing factor to Bitcoin’s price decline could be its pre-halving retrace. Analysts believe that Bitcoin is currently in the early stages of the pre-halving phase, which typically follows a certain pattern. Similar to previous halvings, Bitcoin’s price seems to be following the five phases of the Bitcoin halving.
Crypto trader and analyst Rekt Capital suggested in a social media post that the ongoing price action is part of a pre-halving retrace, which has historically seen Bitcoin experience dips of 38% and 20% during the 2016 and 2020 halving cycles, respectively.
Furthermore, Bitcoin’s RSI (Relative Strength Index) is showing a bearish divergence. The price of Bitcoin has been on the rise since January 22nd, following the fading impact of the “sell-the-news” effect of the spot Bitcoin ETF approval and the slowdown of GBTC outflows as other spot ETFs saw increased inflows.
However, the recent sell-off from a two-year high of $53,019, reached on February 20th, has raised concerns. The BTC/USD 4-hour chart indicates a bearish divergence in the four-hour RSI, suggesting that the bears may have control of the market and could potentially push the price towards the 100-day EMA at $49,234 in the near future.
It’s important to note that this article does not provide investment advice or recommendations. Investing and trading in cryptocurrencies involves risk, and readers should conduct their own research before making any decisions.