What is the reason for the fall of Bitcoin? An overview of the reasons for the fall in the price of Bitcoin

What is the reason for the fall of Bitcoin and what should we look for every time Bitcoin falls? Just a few days ago, the price of Bitcoin fell by 6% (about $1,800) in three days under the influence of various factors.

Various reasons were effective in this price reduction, knowing them can have many advantages for those interested in investing in the digital currency market. First of all, we must remind that the price fluctuations and the fall of Bitcoin are not only related to yesterday and today. The price of Bitcoin, like any other asset in the financial markets, can be associated with negative and positive fluctuations. These drops have usually been frequent in the history of Bitcoin’s price.

What should be done if the price of Bitcoin falls? Which cause of bitcoin drop has a long-term effect on prices, and in which case is the drop in price temporary and only for a few hours and days? If you still don’t know the answers to these questions, your capital is at great risk. So for Examining the possible causes of the fall in the price of Bitcoin Stay with us in the rest of the article.

Reasons for the fall of Bitcoin; What is the most important reason for the fall of Bitcoin?

The fall of Bitcoin can have various reasons; But all these reasons are divided into two general categories: Fundamental reasons and technical reasons. Fundamental causes are events that affect the intrinsic value of Bitcoin, such as economic or political news. Technical reasons are chart patterns and trader behavior.

Therefore, the fall of Bitcoin does not necessarily mean that there is a negative news in the market. Professional traders may decide to sell Bitcoin based on chart patterns. Also, the extreme volatility of the Bitcoin price makes any drop more prominent. Therefore, it can be useful to check the price chart of this digital currency to find the reason for the fall of Bitcoin.

The reason for the fall of Bitcoin from the fundamental point of view

The reason for the fall of Bitcoin can be found in negative economic, political news or events that affect the price of digital currencies. Generally The most important fundamental reasons for the fall of Bitcoin These are:

• Predictable news
• Unpredictable news
• Exit of big investors
• Legislation by governments
• US Federal Reserve policy changes
• economic crisis
• Bad news in the market

Predictable news

Economic data announcements from major countries such as interest rate, consumer price index (CPI), unemployment assessment index (NFP) and gross domestic product index (GDP) have a direct impact on the price of Bitcoin. This kind of news is announced at a specific time; So it is possible to predict their effect on the price of Bitcoin to some extent.

For example, an increase in bank interest rates in America or Europe is an important economic news for Bitcoin and can be a reason for its price to decrease. The increase in the interest rate draws capital from high-risk markets such as crypto to lower-risk markets and can be the reason for the fall in the price of Bitcoin in the short term.

Unpredictable news

The second category of news affecting the price of Bitcoin in the digital currency market is unexpected news. The start of a war or the announcement of the bankruptcy of a large exchange, such as those that have been repeated many times in recent years, are fundamental news.

Although the timing of the announcement of this kind of news is unpredictable, you should have a proper understanding of the conditions of their impact on Bitcoin.

Sometimes a tweet is the reason for a Bitcoin crash. Tweets from rich and influential people in the digital currency market can have an immediate effect on prices. The type of influence of such tweets also depends on their content. Of course, we cannot predict the tweets of Bitcoin whales.

Exit of big investors

On August 17, 2023, the price of Bitcoin witnessed a 12% drop in one day. On this day, the price of Bitcoin dropped from around $28,100 to $25,000. Of course, checking the price chart shows several technical factors for this drop.

The main cause of this drop was the news of the withdrawal of 373 million dollars from SpaceX’s funds as one of the largest investors of Bitcoin from the market of this digital currency.

The probability of such events occurring in the digital currency market is high; So, if you face such a situation, you should probably see the prices fall. Whether Elon Musk or any other whale who has a lot of capital in the market, by selling a significant part of his assets, he creates great fear among users.

Small investors in the digital currency market follow and follow the behavior of whales and big investors. For this reason, such events can lead to a sudden and severe drop in prices.

If you have chosen short-term investment and trading, then exiting the market is the best decision; But if you are a long-term investor, nothing special has happened yet and the situation may be in your favor again.

Legislation by governments

Another important event that can be the reason for the fall of Bitcoin is the introduction of laws related to the digital currency market by large economic governments such as China, America, France and England. Such events target the fear of users, and this fear causes a significant increase in the supply of Bitcoin in the market, and thus causes a drop in prices. This has happened many times in the past.

The price of Bitcoin is affected by the prevailing supply and demand conditions. An increase in demand causes prices to rise and an increase in supply causes them to fall. So any news that has an effect on the supply and demand conditions in Bitcoin will also have an effect on its price.

Over the past year or two, the imposition of restrictive laws on the digital currency market in China and the United States, such as the imposition of heavy taxes, the banning of transactions, the withdrawal of large exchanges from the country and the compulsion of full authentication, have caused the price of Bitcoin to take a downward trend. An event that is not far from expected in the future.

US Federal Reserve policy changes

One of the most important challenges facing Bitcoin and the digital currency market is the policies of the Federal Reserve or the Central Bank of America. When the Federal Reserve announces its interest rate changes and new policies for the coming months, investors’ transactions in the financial markets are affected by these changes. In the past years, most of the Federal Reserve’s policies have had a negative impact on the price of Bitcoin.

Of course, it is expected that with the maturity of Bitcoin and its wider acceptance compared to the past, its price changes and fluctuations will decrease and its influence on market sentiments and short-term news will decrease.

economic crisis

Another important thing that can be considered as the reason for the fall of Bitcoin is bad events and economic crises, especially in countries like China and the United States, which have the largest number of users in the digital currency market.

Not long ago, Evergrande, which is the giant of the Chinese real estate market, declared bankruptcy. This incident had a negative effect on the Chinese economy and created an economic crisis in that country. We can also consider such events as important fundamental factors affecting prices in the digital currency market.

Bad news in the market

Unfortunate events in the digital currency market are another factor contributing to the fall in the price of Bitcoin. For example, Celsius Network, the largest lender of digital currencies, will stop all transfers and withdrawals at the beginning of 2022 due to what “critical conditions” It was postponed.

This issue was one of the main reasons why Bitcoin fell below $20,000 from 2020 onwards. The collapse of major exchanges such as FTX and the dissolution of the famous Terra platform are among the news and events that have not been rare in the history of the crypto market.

The reason for the fall of Bitcoin from a technical point of view

The factors that we brought in the previous sections as the fundamental reasons for the fall of Bitcoin affect the behavior of traders in this market. When fear dominates the Bitcoin investor community, capital starts to flee, and when fear is replaced by hope and greed, prices rise.

In fact, these points all originate from an important and simple economic principle, i.e. the effect of supply and demand on price trends. An increase in supply, if the demand remains constant, will lead to a decrease in prices, and an increase in demand, while the supply remains constant, can be a reason for increasing prices.

With this account, any news or factor that affects the conditions of supply and demand of Bitcoin can also affect its price and be the cause of the rise or fall of Bitcoin.

Technical reasons

sometimes Technical factors also cause The fall in the price of Bitcoin And in general Digital currencies be. by appearing Falling signals The price of bitcoin on the chart, many traders are involved sale their assets and this is the cause Increase supply Bitcoin and as a result price reduction It will be in the market.

For example, as we can see in the chart below, when the price of Bitcoin reached an important supply area, many traders immediately sold their holdings. As a result, the huge volume of sell orders led to a drop in the price of Bitcoin.

Read more: 5 reasons for Bitcoin to fall further

In general, when the price reaches the supply areas in the Bitcoin chart, such events are predictable. Of course, besides the supply areas, other factors and criteria can also help us in this prediction. Using common indicators to predict the price of Bitcoin is one of these factors.

Conclusion

In this article, we talked about the reason for the fall of Bitcoin in detail and shared important points about it with you. The story of examining the reasons for the fall in the price of Bitcoin and other digital currencies does not end with this article; So keep your notebook open to record such points.

The fact is that in the digital currency market, the past is constantly repeating itself, and these tips easily provide the conditions for predicting the price of Bitcoin and making an attractive investment in it. What do you think about the reasons for the fall of Bitcoin? Share your thoughts about this with other readers.