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Only a day after the launch of Bakkt, a Bitcoin futures contract platform, the sector’s most precious digital asset lost 15% of its value. Bitcoin dragged the entire altcoin market with it, resulting in notable cryptocurrencies such as Ethereum losing up to 20% of its value, clinging onto the $160 support level. But why is the bitcoin price going down?
Bitcoin in the past several weeks reached its lowest rates of volatility since May 2019. However, low market sentiment and a lack of institutional money, which some thought would be brought by Bakkt, culminated in Bitcoin retracing from $9,800 to $8,150 in a matter of hours. With a total market capitalization of around $222 billion, the sector has swiftly lost more than $20 billion of its market value.
Struggling to reach previous yearly highs of $14,000, Bitcoin’s recent price movement resulted in a descending triangle, which is regarded as a bearish trend in technical analysis. While prices are stabilizing at the time of writing, some market analysts believe that Bitcoin may drop even further, possibly testing the $7,500 support level.
According to data from CoinMarketCap, Bitcoin is currently trading at around $8,400. Other cryptocurrencies such as Ethereum, XRP, Litecoin, and EOS declined by 14,2%, 11,4%, 16,6%, and 21,5% respectively.
As in tradition, all cryptocurrencies currently present in the market follow the price trend of Bitcoin. Before the final price collapse, Chainlink was the only top 20 project to see positive price movement at an 8% daily price increase, which was seen as a possible economic decoupling. Eventually, even the bullish Chainlink followed the market trend and suffered a loss of 9,7%.
As for the rest of the altcoin market, market capitalization dropped under the 200-Day Moving average on both daily and weekly charts. Compared to historical price movements, the altcoin market has almost reached consolidation levels before the 2017 bull run. However, the potential altcoin bull run is now stopped by Bitcoin’s bearish market trend.
So… Will Bitcoin price drop again? According to prominent market analyst Willy Woo, a drop of up to 5% of BTC dominance could result in even lower prices, although the current dominance level is striving for 70%. In that event, Woo claims that the altcoin market would see a 60% drop in market capitalization compared to Bitcoin.
For now, Bitcoin is relatively stable as it hinges onto its $8,500 psychological support level. In the case of either positive or negative price direction, the altcoin market will swiftly follow Bitcoin.
While several market analysts predicted that Bitcoin’s value would fall if it failed to reach newer highs, the crypto community was still stunned by sudden price decrease of 15%, which occurred in a matter of hours. Searching for a factor that influenced the bearish price movement, some enthusiasts found out that a significant hash rate drop took place before the price fall.
Hash rate can be essentially seen as the performance of miners who work on the blockchain network. In Bitcoin’s case, data from Blockchain.com shows that the hash rate dropped by nearly 40% on Monday. Although the hash rate stabilized relatively quickly following the price crash, many wonder whether the rate was reduced as a result of economic sentiment, or if centralized mining groups were involved.
Seven months away from Bitcoin’s reward halving, we may see many more instances of miners accommodating to lower reward blocks. However, a part of the crypto community believes that the hash rate drop was maliciously organized by numerous centralized mining entities. At the time of writing, it is still unknown if the event was organic or not.
Bakkt, the long-anticipated bitcoin futures contracts platform, was believed to be a gateway to institutional money. Nevertheless, the platform’s launch on Monday revealed that institutional interest in cryptocurrencies is still low, with Bakkt’s daily volume reaching a meager 70 Bitcoin for the first day.
Combined with the fact that Bitcoin struggled to reach new highs, the value of the world’s most famous digital asset was bound to be corrected. Bitcoin supporter and Fundstrat analyst Tom Lee previously stated that the platform’s launch will be seen in the long-term. However, platform served as a real wakeup call to the community, showing that there is no sight of institutional money in the near-time, leaving us to wonder whether we may even expect a bull run in 2020.