Bitcoin’s recent dip has shocked many, especially after it surged by over $25,000 in just a week to hit an all-time high of $93,800 on Wednesday. By Friday morning, however, BTC dropped from $92,000 to under $87,000. While this might seem alarming, it’s important to remember that pullbacks are part of the crypto market’s volatility. Here are three key reasons behind Bitcoin’s $4,000 drop and why the worst could be behind us.
1. Whales and Miners Selling Their BTC
The most probable reason for the sharp retracement is the sell-off by two major groups: whales and miners.
• Whale Activity: Recent data from Lookonchain revealed that large Bitcoin holders (whales) have been moving significant amounts of BTC to centralized exchanges. Just recently, a whale deposited 1,920 BTC ($169M) to Binance in one hour, with a total of 4,060 BTC ($361M) deposited over the past few days. This could be a move to realize profits after Bitcoin’s explosive rally, especially following Donald Trump’s victory in the 2024 U.S. presidential elections.
• Miners Dumping BTC: Another contributing factor is miners selling their Bitcoin. While this was first reported earlier this week, recent data from CryptoQuant indicates that the selling trend continues. Notably, even a Satoshi-era miner moved 2,000 BTC—coins mined back in 2010. These movements to exchanges suggest that miners may be cashing in on the recent price rise.
2. ETF Outflows – A Shift in Investor Sentiment
In the days following Trump’s election victory, there was a massive influx of funds into Bitcoin ETFs, with nearly $5 billion pouring into the funds over just six trading days. This rapid influx may have driven Bitcoin’s price up to what could be its local top, triggering a pullback.
However, the trend reversed on November 14, as more than $400 million was withdrawn from U.S.-based Bitcoin ETFs, marking the third-largest net outflow since the fund’s inception in January. Interestingly, this is not the first time we’ve seen such large withdrawals, with similar patterns observed before previous price bottoms. Historical trends suggest that these outflows often occur before the market stabilizes and begins to rise again.
3. Overbought Conditions – A Correction Was Expected
After Bitcoin’s meteoric rise, several indicators suggested that the market had become overheated. Key metrics like the RSI (Relative Strength Index) and MVRV (Market Value to Realized Value) indicated that Bitcoin was in overbought territory, signaling a potential correction.
The growing levels of FOMO (Fear of Missing Out) also contributed to an unsustainable rally. As the market reached its peak, many investors jumped in to capitalize on the upward momentum, driving the price higher. However, when the buying pressure eased, a natural correction occurred, resulting in the $4K drop.
Is the Worst Over?
While Bitcoin’s price is still down from its all-time high, it’s important to note that it remains up by 17% on the week. The pullback has provided a much-needed breather after the massive rally, and the fundamentals remain strong.
Many investors are still hopeful that BTC can reach the coveted $100,000 mark, but patience will be key. The recent dip could be just a healthy correction before Bitcoin continues its upward trajectory. So, if you’ve been holding off on entering the market, this might be the perfect opportunity to buy at a discount.
Bitcoin’s volatility is nothing new, and as history has shown, pullbacks often precede the next big move. The market may have cooled off for now, but the long-term outlook for BTC remains strong.
