As we’ve seen over and over again in recent months, Bitcoin shattered expectations this week. Except this time around, the orange coin didn’t necessarily do what investors had hoped for. The price of the biggest digital coin took a massive hit, dropping to its lowest level since November as fears over U.S. President Donald Trump’s trade war, plus inflation and interest rate cut expectations, led to a mighty selloff.
CoinGecko shows that the coin is now priced at $84,700—a seven-day drop of more than 12%. But its current level comes after a big dip down to as low as $78,393 on Friday. Is it the end of the bull market? Or is there light at the end of this sizable correction?
ETF movements Those looking at figures tracking the new American ETFs might think the former. Investors fast cashed out of the new products this week, and Tuesday was their worst day on record, with over $1.1 billion leaving the vehicles. Investors spooked by Trump’s trade war have sold positions in “risk-on” assets like stocks and crypto, pushing Bitcoin’s price further down as the president continues to plow ahead with his aggressive policy. But as shocking as the numbers look to bullish Bitcoiners, Bloomberg ETF Research Analyst James Seyffart told Decrypt that the movements were expected for the vehicles. “In general, the way ETFs grow is a sort of two (or three) steps forward and one step back,” he said. And indeed, Friday brought the first positive flows to Bitcoin ETFs in two weeks, per data from Farsight Investors, ending the blood-red streak of outflows with $93 million worth of assets coming back in.
Analysts predict more pain Market experts have predicted more blood, though, and told Decrypt that BTC could plunge a lot lower than $80,000. Traders are currently reassessing the Federal Reserve’s next move, and increasing inflation is making a cut look less likely. Bitcoin, along with tech stocks, tends to do well in a low-rate environment. It’s worth noting that Bitcoin has suffered bigger crashes during bull runs in the past, and on-chain data shows that most selling pressure is coming from newer investors.
Mining difficulty plunges An important Bitcoin metric suffered at the start of the week: mining difficulty. The network’s difficulty level to produce new blocks fell Sunday from over 114 trillion to 110.5 trillion. Experts in the space told Decrypt that operations shutting down due to high energy prices brought on by a cold snap across the U.S.—where a huge amount of the industry is set up—and BTC’s plummeting price led to the fall in difficulty. Mining Bitcoin requires a lot of energy, and has got harder as the largest crypto network expands. A higher mining difficulty means the network is growing more secure. But despite the recent dip, miners added that it was likely to increase again.
When Bitcoin reserves? Well, maybe never. It’s looking a lot less likely, at least at some individual state levels: This week, the number of states suffering setbacks for their own Bitcoin reserves grew, with South Dakota’s HB 1202 bill—to allocate 10% of the state’s public funds into Bitcoin—getting rejected Monday. Now, a total of five states have so far blocked Bitcoin reserve bills. And talk of a national Bitcoin stockpile has quieted lately too—despite President Trump’s earlier promise. Still, it’s early days, and if the next four years are anything like the first month of Trump’s presidency, a lot could happen.
Edited by Andrew Hayward