It has been a few tough days for the cryptocurrency market, including its leader. Since Thursday, the largest digital asset by market cap has been in a correction mode after a few weeks of consolidation.
Notably, bitcoin fell below the southern boundary of its trading range and dropped from $119,000 to its lowest levels since July 10 at $112,700 on Friday evening.
Here are some of the possible reasons behind this rather painful retracement, which range from global economic uncertainty to substantial ETH withdrawals.
Macro Reasons
The overall BTC correction this week began on Wednesday evening, hours after the US Federal Reserve decided to ignore Trump’s pleas for a rate reduction and left them unchanged. Although this decision was entirely expected, even after the positive US GDP report for Q2, which went out the same day, BTC’s price dipped by a few grand.
The asset managed to recover some of the losses by Thursday, but the Fed’s refusal to pivot from its policy has to be named as the first possible reason behind BTC’s overall drop.
The POTUS’s tariffs are second in line, as many of them took effect starting from August 1 (Friday). Additionally, Trump made some last-minute changes, which included adding new countries to the list and raising the tariffs against certain Canadian goods.
The 47th US President made the news once again on Friday evening by ordering two nuclear submarines to be positioned in “the appropriate regions” around strategic Russian locations. This came as a response to a speech by Dmitry Medvedev, a former Russian President, about the growing risks of a war between nuclear-armed adversaries.
Although this concludes our list of three possible macro reasons behind BTC’s correction, here are some bonuses that might have had a smaller impact. First, India said it will continue to buy oil from Russia despite Trump’s threats. Second, the POTUS claimed that the unfavorable jobs numbers that were announced on Friday were “rigged” by a Biden appointee.
Sell-Offs
The second portion of our list includes two main sale-off reasons, which the aforementioned global events and uncertainty may have provoked. At first, reports emerged on Friday during the initial phase of this correction that retail investors had begun disposing of large quantities of their bitcoin holdings.
Their behavior was mimicked to a large extent by investors using the spot Bitcoin ETFs to get some BTC exposure. The ETFs broke a five-day positive streak on Thursday when $114.8 million left the funds, according to data from Farside. The landscape worsened on Friday as investors pulled out $812.3 million in what became the worst single-day performance since February 25.
