Bitcoin has recently experienced a significant drop in value, with a staggering 11.25% decrease over the past three days, resulting in a loss of nearly $12,000. Currently trading at $94,715, the entire cryptocurrency market has witnessed $1.10 billion in liquidations. This downturn has favored bears, while long traders have incurred substantial losses.
The primary reason behind this sudden drop in the market can be attributed to developments in El Salvador, the first country to adopt Bitcoin as legal tender. Despite facing opposition from traditional financial institutions, El Salvador has remained steadfast in its support for Bitcoin. However, in a recent agreement with the International Monetary Fund (IMF) for a $1.4 billion loan to boost its economy, El Salvador has been required to make adjustments to its Bitcoin policy. This condition has reportedly had a significant impact on Bitcoin’s price decline.
Bitcoin, which reached an all-time high of $108,364 on December 17, has since experienced a 12.74% decrease. Currently hovering near a crucial support level, it remains uncertain whether the price will stabilize at this point. However, analyzing the 4-hour chart reveals a potential rebound as the Relative Strength Index (RSI) has dropped below 30, typically indicating a forthcoming price increase. This could present an opportune moment for whales to acquire more Bitcoin at a lower price.
Examining Bitcoin’s daily chart, a divergence between price and RSI movements during its ascent to the all-time high suggested an impending price correction. As the price continues to decline, the alignment of price and RSI could signify a rebound in the near future.
The impact of Bitcoin’s price fluctuations extends to the broader cryptocurrency market, with a 9.31% decrease in overall market cap to $3.21 trillion. Despite the decrease in market cap, trading volume has surged by 13.77% as short traders become more active. Within the past 24 hours, approximately 334k traders have been liquidated, resulting in a loss of $1.10 billion. Notably, the largest liquidation occurred in the ETH/USDT pair, amounting to $15.80 million.
Looking ahead, the crypto market remains unpredictable, with expectations of Bitcoin stabilizing at its current price and potentially rebounding. Market participants anticipate large buy orders to enter the market, as whales often accumulate assets during downturns. It is crucial for traders to remain cautious and monitor market volatility closely. Protection of funds should be a top priority during uncertain market conditions.