No one knows why. But I did some research amd here is four possible reasons.
1. Traders Cashing In _ The Profit Taking Wave
Bitcoin's meteoric rise in the past had led many investors to jump on the bandwagon, hoping to gain substantial returns. And many of them did. However, as with any investment, a point comes when traders decide to cash in on their profits. With Bitcoin sliding below $29,000, a significant number of investors might be taking out their investments, leading to a massive sell-off. This rush to secure profits before a potential further decline exacerbates the downward trend.
2. A Cloud of Negative Sentiment Over Crypto Market
The crypto world thrives on speculation and sentiment. Presently, thereโs an unmistakable bearish sentiment in the market, and itโs not just restricted to Bitcoin. On average, most cryptocurrencies have witnessed a decline of more than 2% in just the past 24 hours. This collective bearish mood can be a self-fulfilling prophecy, with negative sentiment driving prices down, which in turn feeds further negative sentiment.
3. Why is Bitcoin Crashing: Shadow of Regulatory Constraints
Government regulations and interventions have always played a pivotal role in the crypto narrative. Recent news has brought this factor back into the spotlight. A prime example is PayPalโs decision to halt its crypto services in the UK until 2024. According to Reuters, concerns surrounding regulatory landscapes have influenced this decision. Such moves by major financial players can instill a sense of caution in the market, making investors wary of the future of cryptocurrencies in a constrained regulatory environment.
4. Rising U.S. bond yields
The crypto market has been in a slump since mid-July, coinciding with the U.S. dollar index's (DXY) gains in the same period.
Furthermore, its decline coincides with soaring U.S. bond yields. On Aug. 17, the benchmark U.S. 10-year Treasury note yield climbed to 4.31%, the highest since October 2022. This suggests investors are moving toward safer assets over non-yielding cryptocurrencies like Bitcoin.
The yields jumped a day after the Federal Open Market Committee's (FOMC) minutes from July meeting reiterated hawkishness. Notably, most Fed officials believe inflation might stay elevated without further interest rate hikes, raising expectations of another rate hike in September.
Expectations of higher rates have been historically bearish for the crypto market, which likely explains the crypto market's drop on Aug. 17.
However, the implied Fed funds futures rates predict the first-rate cuts in around May-June 2024, according to the data below. Nonetheless, the Fed rates are expected to remain inside the current 5.25-5.50% range until then.
