In recent years, this digital asset has undergone substantial price swings. However, it has remained the world’s largest and most popular cryptocurrency. Also, when the price of Bitcoin fluctuates, the value of other altcoins fluctuates. As of June 2022, this digital asset’s price was $23,000 per coin, down more than 60% from its high of $68,000 in November 2021. Bitcoin played a crucial role in creating a cryptocurrency market that helps people accumulate wealth. Here is why the price of Bitcoin is down today.
Attrition of Confidence in Bitcoin
This digital currency is a speculative asset whose value relies on how confident the people are about Bitcoin. Influencers talk about this digital asset influencing how the public associates itself with it. For instance, there was a time when Celsius Network, which is the largest crypto lending platform, decided to pause transfers and withdrawals between wallets due to extreme market conditions. Due to this decision by Celsius Network, virtual money users lost confidence in Bitcoin and developed fear and panic. In other words, Bitcoin’s value goes down when faith in it erodes and the bear period comes into play. Therefore, people’s confidence in this electronic asset as a medium of exchange and a store of value influences its price.
Forced Leverage
Typically, people use these digital asset exchanges to trade, buy or sell this digital currency. These exchanges will allow a person to collateralize margin positions in this virtual asset with other altcoins. Margin trading is a strategy for traders who want to take more significant trade positions in Bitcoin and have to access leverage from exchanges to do so successfully. On the other hand, traders who practice leverage trading on platforms such as the BitIndexPrime run the risk of their investments’ automatic liquidation when the price of this digital asset falls below the provision to ensure ongoing collateralization.
Moreover, traders can also leverage this digital currency to bet on other cryptocurrencies. However, a heated argument continues that the value of other cryptocurrencies, such as dogecoin and Ethereum, is inflated. For instance, if the value of the other cryptocurrency drops, the exchange may liquidate traders’ Bitcoin as a form of security. Eventually, the crypto exchange ensures that its lending facility can pay obligations to all parties.
Bitcoin Volatility
People view this digital currency as a risky asset that experiences a lot of significant volatility. The price of this digital money frequently swings under any market conditions. Also, people consider Bitcoin a perfect store of value immune to price fluctuations and inflation in general. However, the value of this electronic asset is declining because market narratives have shifted from risk-on to risk-off.
The Fed and Economy
When the world was experiencing the Covid-19 pandemic, financial markets with incentive money from the government and near-zero interest rates made it easy for businesses and consumers to borrow and spend. Also, a lot of money was moving around and making its way into risky assets like Bitcoin. However, since the Covid-19 pandemic is over, the federal government has stopped providing the same money support. Also, the Federal Reserve has raised interest rates to fight high inflation. On the other hand, this digital asset is risky, and when financial markets are hurting, Bitcoin users will suffer.
Final Thoughts
Generally, the value of Bitcoin has been decreasing, especially in 2022, and it is pretty challenging to predict how low its price can go. However, the above article details why Bitcoin’s value has been declining. These details can help you decide whether to invest in this crypto asset or not.
