Bitcoin (BTC) is currently in a downward spiral and has suffered a decline of more than 10% in the past week. This has brought the price down to $57,500, the lowest level since late February.
The current value is in stark contrast to the March 14 peak, when Bitcoin reached an all-time high of $73,700. Since that peak, the coin has lost almost 22% in value. This signals a sharp reversal in market dynamics, affecting not only Bitcoin, but also the broader crypto market.
Not only Bitcoin has taken a big hit; the entire crypto market is experiencing significant losses this week. For example, Ethereum saw an 8% drop and Solana even lost more than 12% of its value.
However, the impact was greatest among the so-called meme coins, which were hit particularly hard. Pepe (PEPE), Dogecoin (DOGE) and Shiba Inu (SHIB) recorded declines of 11.6%, 9.2% and 8.7% respectively.
These market developments have given many investors food for thought. There is uncertainty as to whether this decline is a temporary correction or whether it is the harbinger of a long-term bear market in which prices continue to fall.
Why are crypto prices falling?
The pessimistic sentiment on the crypto market seems to be mainly caused by recent developments surrounding the American Federal Reserve (Fed). A combination of stagnation in economic growth and persistent inflation has dampened hopes for quick interest rate cuts, damaging investor confidence.
In addition, the sentencing of Changpeng Zhao, the former CEO of the crypto exchange Binance, to a four-year prison term has had a significant impact. This verdict has seriously undermined the confidence of crypto investors and is leading to a cautious attitude within the market.
Furthermore, a large number of liquidations of long positions contribute to volatility. On April 30, more than $300 million worth of positions were liquidated, setting off a chain reaction of forced selling. These sales in turn triggered other orders and margin calls, leading to further selling and increased volatility.
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