The cryptocurrency market experienced a decline today, causing the total market capitalization to drop by 2.75% and settle at $1.90 trillion on Feb. 21. This downward movement has resulted in Bitcoin (BTC) increasing its market dominance by 0.25% to reach 50.77%, as technical indicators suggest further corrections.
Let’s delve into the reasons behind Bitcoin’s price decline.
One possible explanation is the lack of interest from retail investors, as indicated by data from Google Trends. Searches using the keyword “Bitcoin” show limited engagement from retail investors, implying that despite Bitcoin’s impressive 109% growth in the past year, retail investors remain skeptical.
Coinbase’s recent earnings report also supports this notion, revealing that retail activity in the last quarter of 2023 remained low. A closer analysis of the data shows that retail trading volume from Q2 2022 to Q4 2023 was lower than in Q4 2020, further cementing the idea that retail investors have yet to enter the market.
According to Coinbase’s report, retail transactions, which previously accounted for over 90% of the company’s revenues, now contribute to less than half of its net revenue.
Market intelligence firm Santiment also confirms this narrative, stating that despite the interest in Bitcoin surrounding the SEC’s approval of 11 ETFs, there is a lack of “new greed” in the market.
Another factor contributing to Bitcoin’s price decline is its pre-halving retrace. Analysts believe that Bitcoin is currently experiencing the early stages of the pre-halving phase, which historically follows a specific pattern. Similar to previous halvings, BTC’s price seems to be following the five phases of the Bitcoin halving.
Additionally, Bitcoin’s RSI (Relative Strength Index) shows a bearish divergence. Since Jan. 22, BTC’s price has been increasing after the initial impact of the spot Bitcoin ETF approval faded. However, the recent sell-off from a two-year high of $53,019 on Feb. 20 has raised concerns. The four-hour RSI on the BTC/USD chart displays a bearish divergence, indicating that an increase in price is accompanied by a decrease in momentum, potentially leading to downward movements.
This bearish divergence suggests that bears may be in control of the market and could aim to push the price towards the 100-day EMA at $49,234 in the short term.
It’s important to note that this article does not provide investment advice or recommendations. Any investment or trading decisions should be made after conducting thorough research.