Bitcoin price has crashed in the past few months as concerns about the coin and other risky assets continued. BTC was trading at $80,000, down by 25% from its highest point this year, and is hovering near its lowest level since November 11. This article explains why BTC price has crashed and why it may bounce back this year.
Spot Bitcoin ETFs are having outflows
The first main reason why the Bitcoin price has crashed is that demand from Wall Street investors has waned.
Data by SoSoValue shows that all spot ETFs have been shedding assets this year, with the cumulative outflows reaching over $5 billion. They now have inflows worth over $35 billion, with the Blackrock’s IBIT having the most assets worth $45 billion. The other top spot Bitcoin ETFs are from Fidelity, Grayscale, Ark Invest, and Bitwise. Ideally, Bitcoin often does well when there is substantial demand from Wall Street investors.
A likely reason for these outflows is that these investors don’t believe that Bitcoin is a safe haven when risks are rising. Instead, most of these investors have moved to gold, whose ETFs have seen substantial inflows in the past few months. The popular SPDR Gold ETF (GLD) now has almost $100 billion in assets, a figure that has continued to rise.
Correlation with stocks and other assets
Bitcoin price has crashed because of its correlation with stocks and other assets like bonds and commodities. American stocks have all plunged in the past few weeks, erasing trillions of dollars in value.
The Dow Jones Index has crashed by over 12% from its highest point this year, while the blue-chip Nasdaq 100 and S&P 500 have plunged by over 15%.
This decline happened because of the recent decision by Donald Trump to levy tariffs on all countries. While he has walked back from his initial threat, he has maintained tariffs on all countries at 10%. He also maintained his auto tariffs and on aluminium and steel. Historically, Bitcoin has always had a close correlation with stocks and other assets.
Why Bitcoin price will rebound
There are a few reasons why the BTC price will rebound over time. First, this is not the first time that BYC has moved into a bear market. For example, it tumbled by over 33% from its highest point in March last year to its lowest level in August. It then staged a strong comeback shortly after that.
Bitcoin price also plunged by over 77% in 2022, falling to a low of $15,217 as Terra and FTX exchanges imploded.
The same has happened in the stock market before. All the top indices like the Nasdaq 100 and S&P 500 dropped sharply during the dot com bubble, the Global Financial Crisis, and the start of COVID and then recovered.
Bitcoin price has strong technicals
The other main reason why the BTC price will recover is that it has strong technicals on the weekly chart. This chart shows that it remains in an overall bullish trend and is above the 200-week moving average.
Most importantly, it has formed a giant megaphone chart pattern, a popular bullish continuation sign. This pattern is made up of two ascending and diverging trendlines. In most cases, it often leads to a strong surge. If this happens, the coin will likely soar to a record high of $109,240 later this year.
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