Bitcoin price fell again, after seeing some recovery on Wednesday due to a shift in net spot Bitcoin ETF flows. However, after just one day, the leading cryptocurrency appears to have resumed the downtrend and this post-recovery decline has started a worrying trend. So, what are the factors leading to this decline?
Bitcoin price is suffering from a sell-off
One of the main factors behind Bitcoin’s decline was the massive sell-off that shook the digital asset. These sell-offs come not just from any investor, but from massive Bitcoin sell-offs coordinated by large governments.
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One of the major news that shook the space was the fact that the German government started selling coins. In total, the German government sold about 2,786 bitcoins, which were worth about $140 million at the time of the sale.
However, the German government is not the only one selling. News also broke that the US government has begun transferring Bitcoin seized from the Silk Road statue again. On-chain data aggregator Arkham reported that the US government transferred nearly 4,000 bitcoins from its wallets to the Coinbase exchange.
In total, The US government transferred 3,940 bitcoins to the exchangeWhich amounted to $241.22 million at the time of the deal. This transfer is concerning as coins are usually transferred to centralized exchanges like Coinbase for sale as these trading platforms have deeper liquidity compared to their decentralized counterparts.
Has BTC hit the bottom?
While the downtrend appears to have resumed, there are signs that the bottom is closing. One of these signs is the return of demand to the market. For example, the Spot Bitcoin ETFs saw seven straight days of outflows, which finally turned around on Tuesday. Data from Coinglas Offers Between Tuesday and Wednesday, inflows into spot Bitcoin ETFs exceeded $50 million, ending a rough week of outflows.
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Another potential issue is the profit and loss margin for investors. This shows how many Bitcoin investors are currently making profits, and the higher the profitability, the more likely they are to sell as investors receive profits from their positions.
However, profitability levels have declined, meaning investors are less likely to sell their holdings while they wait for better prices. This often gives demand time to build up and create a potential rebound point for recovery.
Currently, Bitcoin price remains stable at the $61,000 support level at the time of writing. But if the sell-off resumes, the leading cryptocurrency could fall to the $60,000 level soon.
Featured image created with Dall.E, chart from Tradingview.com