- After a stellar price rally, Bitcoin nosedives as much as 20 percent in 48 hours
- The large inflow of Bitcoin could be the reason for the decline
- As the near future of Bitcoin looks uncertain, traders and investors turn to Altcoins
Bitcoin opened in 2021 with what is described by many as the best bull run in its history. The massive gains saw Bitcoin set a new all-time high of $41,962.36.
Follow the rally, Bitcoin (BTC) entered a brief consolidation on the 8th of January before nosediving in the next 48 hours. BTC slumped from its new high of around $42,000 to an intraday low of around $32,000.
As Bitcoin shed most of its stellar gains over the weekend, a host of alternative cryptocurrencies remained unscathed, playing catchup with the crypto market leader.
Why the Sudden Decline?
Analysts have attributed Bitcoin’s recent price drop which is its worst since March 2020, to the mass cashing out of Bitcoin. Especially from Bitcoin whales or large holders of the coin.
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Bitcoin investors and traders who bought the coin at the start of December 2020 had gotten profits of more than 60 percent. Bitcoin trading above $42k represented the best time for whales and traders to cash out their massive holdings.
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Philip Swift, a Bitcoin trader and creator of Lookintobitcoin, had cautioned on January 8 when Bitcoin set its record high that the was reaching overheated levels. Scott Minerd, the Global Chief Investment Officer of Guggenheim Partners tweeted on Jan. 11.
Bitcoin’s parabolic rise is unsustainable in the near term. Vulnerable to a setback. The target technical upside of $35,000 has been exceeded. Time to take some money off the table.
According to analysts, this large inflow of BTC can be directly linked with the massive decline Bitcoin is experiencing at the moment. At the time of this writing, BTC is being traded at $34,300 dropping over 25 percent in the last 48 hours.
On the Flipside
- Bitcoin’s sudden price drop has been carried by the second largest cryptocurrency Ethereum.
- Over the last 24 hours, ETH has dropped as much as 14 percent and now trades around the $1,000 mark, haven traded as high as $1,300 two days back.
The Altcoin Market Could Grow at The Detriment of Bitcoin
Forecasting the price movement of the crypto market has never been an accurate task, largely because of the volatility of the market. However, analysts are pointing to the possibility of the Bitcoin losing its dominance of the crypto market soon.
Jean Baptiste Pavageau, an associate of ExoAlpha explained that the process has already begun. According to Pavageau, the rationale behind the growth of the altcoin market is the “classic wealth distribution pattern.”
The analyst explained that over the last two weeks, Bitcoin whales have been taking their profit and investing them in other alternative assets.
He further explains:
While the upside on Bitcoin is decreasing, the altcoin market is becoming more appealing for traders and investors who are looking for large returns. We expect to see Bitcoin dominance starting to decrease and the altcoin market booming over the next few weeks.
His explanation is confirmed by several reports about whales in South Korea, China, and institutional investors selling their BTC holdings. How much of Bitcoin’s dominance will be shaved off in the coming weeks remains to be seen.
