Why is Bitcoin and the Crypto Market Down Today?

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The bitcoin price continues to decline, dragging the broader crypto market with it. BTC is down 4.52% in the past 24 hours, while ETH is down 4.10%. With a current price of $26,289, Bitcoin is recording its lowest value since March 14 of this year, when the price dropped to $26,544.

Why are Bitcoin and Crypto down?

As always, the reasons for Bitcoin’s deep price pullback are complex. Remarkably, there was actually some good news on Wednesday, May 10, as the CPI continued to decline, pushing the price of Bitcoin up to $28,317.

However, fake news about an alleged sale of 9,800 BTC by the US government rocked the market. Bitcoin’s flash price crashed as a result and has apparently been unable to recover since. But this story is only half the story.

Various other factors are currently weighing on the crypto market: the dollar index (DXY) is currently experiencing a rebound and was recently able to hold above the historically important support, the liquidity problem has intensified again with the departure of US market makers. and Jane Street, BTC formed a (supposed) head and shoulders pattern in the 1-day chart, Bitcoin and Ethereum blockchain congestion and last but not least a lot of FUD (US Government, Binance US and Grayscale sales) .

Unsurprisingly, uncertainty in the Bitcoin and crypto market is currently quite high. The Dollar Index (DXY) is currently hovering above the historically crucial support at 101.8. Since early April, DXY has already been oddly close to support, but has so far been able to fend off any onslaught from the bears.

As Texas Wet Capital’s Christopher Inks writes, the DXY rose again yesterday (to 102.056) and is currently preventing a rally in risk assets:

The $DXY rally is making longs difficult this morning. So, if you are trying to acquire risky assets, it is better to wait and watch a bit.

Liquidity issues, bearish chart pattern and FUD

Another blow to the crypto market on Tuesday was the news of Jump and Jane Streets leaving the US crypto market. The decision of the two main market makers stems from regulatory uncertainty in the United States.

As reported by NewsBTC, liquidity has been a huge problem in the past, which could now get worse. Due to low liquidity, higher volatility is likely as larger buy and sell orders move the market faster.

Additionally, a (supposed) head and shoulders pattern on the Bitcoin 1-day chart is currently causing fear among traders. The pattern may signal a crash at $25,000.

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A clean H&S reversal pattern that could send #Bitcoin to $25,000 or lower in no time. 2D time lapse. pic.twitter.com/FllMuJZlQP

PROFIT BLUE (@profit8lue) May 6, 2023

Congestion of the Bitcoin blockchain by Ordinals and the controversial BRC-20 meme coins, which are considered a DDoS attack by part of the community, have certainly added to the uncertainty. Although 300,000 transactions are still waiting to be confirmed in the mempool, the problem is slowly subsiding.

The popularity of Bitcoin Ordinals transactions is declining. Trading volume has fallen for three straight days after hitting a record high of $18.13 million on May 8. Yesterday, the trading volume fell to $4.86 million. The number of transactions also fell from 17,000 to 6,000. UniSats’ market share fell from 80-90% to 50-60% currently.

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#Bitcoin block size war 2.0?

According to data from Dune, transactions via Unisat have increased exponentially since early May.

Unisat, the main wallet of BRC20, is developed by a Chinese development team from the BSV community. pic.twitter.com/DfW46mbhZb

Jake Simmons (@realJakeSimmons) May 11, 2023

Last but not least, there are currently unconfirmed rumors (FUD) circulating about Binance US and Grayscale. Binance US has caused a stir in recent days as the price of Bitcoin was showing a high price premium. The reasons have been the subject of much speculation.

Grayscale is currently the subject of heated debate, as DCG is believed to owe around $575 million to bankrupt crypto lender Genesis Trading in May, with the loans coming due next week. Rumor has it that Grayscale might sell something on Coinbase to cover the capital needed to repay the loan.

At press time, Bitcoin price stood at $26,289, initially receiving support from the 100-day EMA.

BTC price drops deeper, 1-day chart l Source: BTCUSD on Tradingview.com

Featured image from iStock, chart from TradingView.com

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