Crypto News – In 2023, the price of Bitcoin surged 160% during a year-long rally, culminating in a year-end surge driven by an ETF frenzy. But January saw a drop in pricing.
The January Bitcoin Decline: 3 Reasons Why BTC is on the Decline
In January, a market that had become overbought following months of growing confidence regarding the SEC’s approval of Bitcoin ETFs burst, allowing some correction in the price. Short-term traders helped drive the price upward during this period, and they later profited by “selling the news” when the Bitcoin ETF was approved. At last, a more pessimistic opinion over the future of Bitcoin in January has been sparked by harsher macro conditions, including a higher dollar following a months-long decline.
SEC Acts Arbitrarily
The D.C. Circuit Court of Appeals’ decision in favor of Grayscale last August sent ripples across the crypto community. According to the lawsuit, the SEC acted arbitrarily and capriciously in rejecting the crypto hedge fund’s request for a Bitcoin ETF. The SEC was directed by the judge to try its best to approve an ETF. The price of Bitcoin then started to spike in October. From $25,811 on September 1 to $46,670 on January 10, the average exchange rate on cryptocurrency exchanges increased by 80% in just over four months.
Buy the Rumor, Sell the News Tactic Drives Prices Down
A long-term strategy of buying and holding without selling is adopted by some Bitcoin investors. They firmly believe that there is still a significant upward trend in the global acceptance of cryptocurrencies, and they would be reluctant to sell any of their holdings. According to Antoni Trenchev, co-founder of cryptocurrency lender Nexo, the January decline in the price of Bitcoin was an illustration of the exchange market phenomenon known as “buy the rumor, sell the news.”
Macro Conditions Deeply Affected Bitcoin
According to a report published by analysts on Bitfinex on Tuesday, the reason why the price of Bitcoin dropped in January was that “bearish sentiment appears to be prevailing.” If the decline persists, they anticipate significant support levels at $38,000 and $36,000. However, Friday’s 5% increase may indicate a recovery is underway.
Over the past two weeks, Bitcoin has been challenged by tougher macro conditions — evidenced by rallying rates and a strengthening dollar,Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC