Bitcoin experienced a tumultuous ride in Tuesday’s market, hitting a new all-time high of $69,324 before witnessing a significant plunge. This rollercoaster journey raises questions about market dynamics, investor behaviour, and the impact of external factors on the cryptocurrency landscape.
Bitcoin’s Meteoric Rise and the Sudden Plunge
Bitcoin’s price surge, fueled by the market inflows ever since the approval of Bitcoin ETFs in January, catapulted it past its previous all-time high in November 2021.
Bitcoin’s remarkable rally in 2024, up approximately 63%, has been attributed to robust demand for new U.S. ETFs and anticipation of a slowdown in the token’s supply growth. The approval of spot ETFs from major investment firms like BlackRock Inc. and Fidelity Investments contributed to nearly $8 billion in net inflows in less than two months.
The approval of BlackRock’s ETF (IBIT) in January 2024, swiftly accumulating over $10 billion in assets, aligns with Bitcoin’s doubling in value since the filing.
Bitcoin crossed its previous ATH of $69K and reached $69,324 before plummeting 12% to just above $60,000 in five hours. At the time of writing, the current price of Bitcoin overs around $63,836.
Market analysts had already anticipated this level of volatility, considering Bitcoin’s historical price movements during previous bull markets.
Alex Thorn, Head of Research at Galaxy, remarked, “This is likely the beginning of a lot of volatility as we go up,” emphasizing that bull markets often involve significant corrections. Thorn took reference from the 2017 market, where multiple corrections of 25% or more occurred on the way to the previous all-time high of $20,000.
Thorn further marked the importance of understanding that bull markets are not linear and pointed to similar price fluctuations during the COVID-19 pandemic in 2020-2021. He suggested that some consolidation might be healthy after the substantial year-to-date gains.
Profit-Taking Amidst Record Highs
The surge in Bitcoin’s price to record levels triggered a significant number of traders to capitalize on profits.
Zaheer Ebtikar, founder of crypto fund Split Capital, noted, “Given that almost everyone who has ever bought Bitcoin has now made a profit, there is a good chance that we will see some profit-taking.”
Hsaka, a prominent Bitcoin trader, weighed in on X – “Bitcoin is NOT naturally going down. It is being pushed down via whales placing spoofy sell orders on exchanges to make noobs and risk managers sell to ‘buy back lower.”
Bitcoin’s recovery from the 2022 lows has transformed the industry, with the total market value reaching approximately $2.6 trillion. Despite scepticism from traditional finance personalities, such as Jamie Dimon and Charlie Munger, Bitcoin continues to garner attention from major financial institutions.