The cryptocurrency market experienced another night of significant volatility. Following a sharp decline on April 13, Bitcoin prices plummeted once again during early trading hours on April 14, breaking below the $60,000 mark with a 24-hour drop exceeding 7%. Starting around 4 a.m. UTC, many investors received dreaded liquidation alerts as Bitcoin fell by $5,000 in just 15 minutes, leading to massive liquidations among leveraged long positions.
One trader affected by the extreme volatility shared, "Bitcoin has been swinging wildly between sharp rises and falls. At these high levels, it becomes increasingly risky. Market sentiment can reverse in an instant—money evaporates faster than water." As of the latest update, Bitcoin continues to trade under pressure around $62,649, down more than 9% over 24 hours.
What Triggered the Sudden Bitcoin Sell-Off?
In the early hours of April 14, Bitcoin faced intense selling pressure, briefly dipping below $60,000 before a slight recovery. By late morning, another wave of selling pushed it below $63,000.
Other major cryptocurrencies followed suit. Ethereum dropped over 8.5%, while Dogecoin fell nearly 14%. According to CoinGecko, the total cryptocurrency market capitalization declined by 5.8% to $2.4 trillion.
Data from Coinglass reveals that the past 24 hours saw 258,000 traders liquidated, totaling $966 million in losses. Long liquidations accounted for $787 million, with short liquidations at $179 million.
This week, Bitcoin has shown repeated high-volatility drops. For example, on April 13, it fell by more than $2,000, from above $67,100 to under $65,000.
Bitcoin spot ETFs also saw reduced inflows. SoSoValue reported a net outflow of $55.07 million on April 12. Grayscale's GBTC alone had a net outflow of $166 million, while BlackRock's IBIT led inflows at approximately $111 million. Total net assets for Bitcoin spot ETFs stand at $56.22 billion.
Industry experts point to heightened geopolitical tensions driving safe-haven sentiment away from risk assets like cryptocurrencies. Additionally, high expectations and speculative activity around the upcoming Bitcoin "halving" may have inflated prices. If these expectations aren't met, investors might take profits, triggering sharp declines.
Understanding the Upcoming Bitcoin Halving Event
A major event for the cryptocurrency market—the Bitcoin halving—is expected to occur in April. This event directly impacts Bitcoin's supply and demand dynamics.
The Bitcoin halving refers to the 50% reduction in block rewards issued to miners, occurring approximately every four years. This reduction slows down the rate at which new Bitcoin enters circulation. The exact timing depends on Bitcoin's network block production speed.
Data from BTC.com indicates that the fourth Bitcoin halving is expected in less than 7 days, with 996 blocks remaining. It is projected to occur around April 20. Previous halvings took place in 2012, 2016, and 2020.
According to Rekt Capital, a cryptocurrency trader and analyst, Bitcoin typically undergoes a pre-halving price correction. In the 2016 and 2020 cycles, Bitcoin fell by 38% and 20%, respectively.
A recent J.P. Morgan report suggested that the halving could negatively impact Bitcoin miners' profitability. The report also warned that Bitcoin's price could fall to $42,000—a potential drop of over 36% from current levels.
Profit-Taking by Long-Term Holders
Bitcoin has seen a strong rally since the beginning of the year.
A Messari report highlighted a 69% gain in Q1 2024, largely driven by the introduction of spot Bitcoin ETFs, which brought over $12 billion in inflows. These ETFs now hold approximately 831,000 Bitcoin, valued around $59 billion.
This bullish trend also lifted stocks of cryptocurrency-related companies like Coinbase, MicroStrategy, and Galaxy Digital.
However, as Bitcoin reached new all-time highs, some long-term holders began taking profits. Glassnode data shows that since late 2023, when Bitcoin surpassed $40,000, holdings of long-term investors (those holding for 155 days or more) have steadily decreased, while short-term holder positions increased. During this period, long-term holders sold around 900,000 Bitcoin.
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Frequently Asked Questions
What does Bitcoin halving mean?
The Bitcoin halving is an event where the reward for mining new blocks is cut in half. It occurs roughly every four years and is designed to control inflation by reducing the rate at which new coins are created.
Why did Bitcoin drop so suddenly?
The drop was likely due to a combination of factors including geopolitical tensions, profit-taking by long-term holders, and reduced inflows into Bitcoin ETFs. Market sentiment can shift rapidly in highly leveraged environments.
How often does Bitcoin halving occur?
Bitcoin halving occurs after every 210,000 blocks are mined, which typically takes about four years. The next halving is expected around April 2024.
What impact does halving have on Bitcoin’s price?
Historically, halving has been followed by bull markets due to reduced supply. However, short-term price corrections often occur before or immediately after the event.
Should investors be worried about high volatility?
Cryptocurrencies are inherently volatile. Investors should only allocate capital they are willing to risk, use stop-loss orders, and avoid over-leveraging.
Are ETFs still supporting Bitcoin’s price?
While ETFs initially provided substantial buying pressure, recent data shows fluctuating inflows. Market conditions and investor sentiment play significant roles in ongoing support.