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Why is Bitcoin Going Down? Cryptocurrency Price Drops amid Apparent Sell-off

Newsweek logo Newsweek 1/11/2021 Jason Murdock
In this photo illustration, a visual representation of the digital cryptocurrency, Bitcoin is displayed in front of the Bitcoin course's graph of Bitfinex cryptocurrency exchange website on November 20, 2018 in Paris, France. © Chesnot/Getty In this photo illustration, a visual representation of the digital cryptocurrency, Bitcoin is displayed in front of the Bitcoin course's graph of Bitfinex cryptocurrency exchange website on November 20, 2018 in Paris, France.

A plunge in the value of Bitcoin this week may have been sparked by crypto-investors selling off their digital currency, experts have said.

The price of a single Bitcoin crashed by double-digit percentages between Sunday and Monday, marking the largest two-day dip since March 2020, Bloomberg reported.

A recent rally in the cryptocurrency had culminated in the price topping $41,000 Sunday, however by Monday morning it had sank by more than 12 percent.

The price of one Bitcoin was approximately $33,000 at the time of writing, according to a dashboard monitoring fluctuations in real-time maintained by CryptoCompare.

The value of the decentralised crypto is famously volatile, and can shift wildly in a short space of time. Bitcoin prices surged in recent months, seemingly linked to increased use by institutional investors and financial firms such as PayPal and Square.

Broadly, the downturns on Monday resulted in around $200 billion being wiped from the total cryptocurrency market, CNBC reported. Regardless, Bitcoin was still up more than 300 percent in the past 12 months. In January 2020, a Bitcoin was around $8,000.

The cryptocurrency was the center of a financial bubble in 2017, when the price spiked to almost $20,000 amid unprecedented investor hype—before crashing.

Simon Peters, an analyst at multi-asset investment platform eToro, told Newsweek on Monday the most-recent fluctuation appeared to be a "short term correction."

Peters said: "It's important to put the price in perspective. Although we have seen a fall, bitcoin is still up from last week where it started at $30,000.

"After such a sustained and volatile rally, it is natural for an asset to see a sell-off," the analyst added, noting Bitcoin experienced a meteoric price rise. "Some investors may be selling out of positions now anticipating a deeper correction in the future."

Charles Hayter, the CEO and co-founder of CrypoCompare, told Newsweek one factor that was driving the bull run was "institutional money cornering the market."

Amid shifts, the cryptocurrency community was highly active on Twitter on Monday, some claiming that a price correction does not indicate a full crash is taking place, while other bitcoin loyalists were suggesting that the dip was simply a chance to buy cheaper.

Simons Chen, executive director of investment and trading at Hong Kong crypto firm Babel Finance, told CNBC that a correction was "expected" as the unprecedented rise in value in past months was likely to "induce sell pressure" on the markets.

Peters told Newsweek that despite fears of a significant correction that could pop the bubble yet again, the "fundamentals behind bitcoin remain very positive."

He said: "A number of metrics point to bitcoin [being] in bull market territory in 2021. The amount of bitcoin in circulation is low, indicating investors are moving bitcoin from exchanges to wallets, where they are looking to hold for the long term.

"This lack of supply has contributed to the recent positive price movements. Combine this with continued institutional investment, which has often driven the price up when we have seen momentary dips, and bitcoin remains in a positive place for 2021."

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