Cryptocurrencies faced a significant downturn on Thursday, with Bitcoin retracing to $40,000. According to Coin Metrics, Bitcoin traded 3.6% lower at $41,167.14, reaching as low as $40,601.37, its lowest point since December 18. Ether, which had shown resilience as Bitcoin struggled, also experienced a decline, dropping 3% to $2,448.41. This downward movement influenced the broader crypto market.
The correction in Bitcoin had a ripple effect on crypto-related stocks, with Coinbase and Microstrategy closing the trading day down by 7% and 2%, respectively. Miners CleanSpark and Marathon Digital saw losses of over 6%, while Riot Platforms and Iris Energy fell 5% and 8%, respectively.
Julio Moreno, head of research at crypto data provider CryptoQuant, commented on the situation, stating, “We are still in the correction post-ETF launch.” He noted that short-term traders and significant Bitcoin holders were actively selling amid a risk-off sentiment. Moreno added that unrealized profit margins had not dropped sufficiently for sellers to exhaust their positions.
The unrealized profit of short-term Bitcoin holders has decreased to about 16% this week from 48% in December. However, Moreno suggested that it might need to fall below 0% to confirm a bottom in Bitcoin’s price. Additionally, the halt in Bitcoin flows to derivative exchanges, a trend observed recently, has historically signaled bear markets or price corrections.
Bitcoin has now seen a 12% decline since the U.S. Securities and Exchange Commission approved the trading of Bitcoin ETFs on January 10. Chart analysts warn that, while the long-term uptrend remains intact, further declines could be on the horizon. Rob Ginsberg of Wolfe expressed concerns about a potentially disappointing first quarter of the year.
Moreno, in an earlier projection, had anticipated that the post-ETF decision correction could push Bitcoin’s price down to as low as $36,000. The cryptocurrency is down approximately 3% year-to-date after closing 2023 with a remarkable 157% gain.
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