Bitcoin price seemed poised to return up to a possible new all-time-high before it came crashing down. The price of the cryptocurrency recently rose to as high as $15,840 before it fell below $15,000 to $14,800. Falling over 6% in less than a day’s trading after cashing in at a daily high, the cryptocurrency was likely affected by several factors influencing the market.
What caused Bitcoin’s sudden decline?
Several points come quickly to the forefront looking at Bitcoin’s rapid decrease in the trading price:
- The recovery of the US dollar following Joe Biden’s win over current US President Donald Trump in the United States elections.
- The decline in gold prices.
- The announcement of successful COVID-19 vaccine trials, and
- Bitcoin whales selling off.
The dollar increase in value causing Bitcoin to fall
As the two bear an inverse relationship, the recovery of the US dollar historically leads to investors pooling their funds back to the fiat-backed assets. While it might be too early to make any suggestions about the long-term health of the US dollar, a recovery means there are fewer investors looking to hedge against the currency. As a result, fewer investors add to their cryptocurrency holdings as part of a diversification of their portfolios.
Successful vaccine: Gold falling, linked to Bitcoin price
As reported by the Associated Press, Pharmaceutical company Pfizer announced positive news regarding the third phase of its vaccine trial. According to the Pfizer, the current vaccine trial is proving 90% effective in preventing COVID-19. Having tested on 44,000 participants, the positive news of complete success in a trialled vaccine would be followed by the official US Food and Drug Administration to test the trial itself before the vaccine can go to mass production and subsequent distribution.
The good news for the world and the stop of the spread of the Coronavirus seems to have resulted in bad news for the cryptocurrency market though. Following the announcement, the Dow Jones Industrial Average rose by over 1,000 points which rallied the US stock market.
Linked to hedge assets, both gold and Bitcoin saw a shock to the market taking a rapid decline. Amsterdam Stock Exchange trader Michaël van de Poppe explained that the price of the US dollar affects the price of Bitcoin as they are priced against the national currency. Thus, if the US dollar sees a recovery, the price of the alternative assets also sees a price dip.
A correction on $BTC would be tremendous and a great opportunity in general.
— Crypto Michaël (@CryptoMichNL) November 9, 2020
Are Whales going to sink the Bitcoin ship?
As the token started to decline quickly, it was found that Bitcoin Whales – or large scale investors – were selling Bitcoin. According to on-chain analyst firm CryptoQuant and other traders know in the industry, the pattern seemed to strongly indicate that Bitcoin’s rapid drop in price was furthered by whales selling off. The timing for the large investors to sell would be at a prime time in the market, given the resistance levels that Bitcoin was trying to break as well as factors threatening a bearish pullback.
Despite whales selling, however, other traders and long-term investors don’t seem concerned about the state of the market. Cryptocurrency trader and Bitcoin bull Cantering Clark suggested that this sell-off is simply “fast money” investors opting out to make a quick profit:
The players that enter on behalf of the longer-term thesis for Bitcoin are not changing their positioning.
— Cantering Clark (@CanteringClark) November 9, 2020