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The Bitcoin price is in a decline once more, after seeing some recovery on Wednesday due to the turnaround in the Spot Bitcoin ETFs net flows. However, just one day later, it seems the pioneer cryptocurrency has resumed the downtrend and this decline after the recovery has begun a worrying trend. So, what are the factors that are driving this decline?
Bitcoin Price Suffers From Sell-Offs
One of the major factors that have been behind the Bitcoin decline is the major sell-offs that have rocked the digital asset. These sell-offs are not just from any investor, but rather large BTC sells being orchestrated by large governments.
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One of the major news that rocked the space was the fact that the German government had begun selling coins. In total, the German government sold around 2,786 BTC, which was worth around $$140 million at the time of the sale.
However, the German government is not the only one that has been selling. News also broke that the US government had begun moving Bitcoin seized from the Silk Road bust once again. On-chain data aggregator Arkham reported that the US government had moved almost 4,000 BTC from its wallets to the Coinbase exchange.
In total, the US government moved 3,940 BTC to the exchange, which amounted to $241.22 million at the time of the transaction. This transfer is worrying as coins are usually moved to centralized exchanges such as Coinbase for sale as these trading platforms possess deeper liquidity compared to their decentralized counterparts.
Has BTC Reached Its Bottom?
While the downtrend looks to have resumed, there are signs that point to the bottom being closed. One of these signs is the return of demand into the market. For example, the Spot Bitcoin ETFs had seen seven consecutive days of outflows, which eventually turned around on Tuesday. Data from Coinglass shows that between Tuesday and Wednesday, inflows into the Spot Bitcoin ETFs have crossed $50 million, ending the brutal week of outflows.
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Another possible tell is the profit and loss margin for investors. This shows how many Bitcoin investors are currently seeing profit, and the higher the profitability, the higher the likelihood of a sell-off as investors take profit from their positions.
However, the profitability levels have dropped, meaning that investors are less likely to sell their holdings as they wait for better prices. This often gives demand time to build up and create a possible bounce point for a recovery.
For now, the Bitcoin price is holding steady at the $61,000 support at the time of writing. But if sell-offs resume, then the pioneer cryptocurrency could fall to the $60,000 level soon.
Featured image created with Dall.E, chart from Tradingview.com
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Scott Matherson
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