Bitcoin and Cryptocurrencies Showing Weakness: Will There Be Further Declines?

• On Monday, Bitcoin and other cryptocurrencies experienced a drop, accompanied by signs that more traders were realizing profits after the recent rally in digital assets.
• The largest digital asset, which surged by about 50% in the last two months, sparking calls for a new crypto bull market and ending a calm trading period, fell.
• Digital assets have benefited from a series of positive factors, including expectations that U.S. regulators will soon approve the first spot Bitcoin exchange-traded fund (ETF).

Bitcoin and other cryptocurrencies faced a sharp price drop on Monday: What could this drop mean?

Cryptocurrencies Displayed Weakness on Monday

On Monday, Bitcoin and other cryptocurrencies experienced a drop, accompanied by signs that more traders were realizing profits after the recent rally in digital assets. While prices could still decline further, cryptocurrencies continue to benefit from multiple factors.

Bitcoin’s price dropped by 2% in the last 24 hours, falling below $41,000, signaling a retreat to the lowest levels in two weeks and a pullback from the 20-month highs above $44,000. The largest digital asset surged by about 50% in the last two months, sparking calls for a new crypto bull market and ending a calm trading period.

Anthony Rousseau, President of Brokerage Solutions at TradeStation, stated, ‘Bitcoin’s market structure is continuing strongly with an approximate peak near $45,000. A pause in Bitcoin and defining a new range could be seen as a healthy sign.’ He continued, ‘A perfect storm for a strong 2024 could be forming.’

Indeed, crypto bulls are still expecting more gains, as competition in the options market suggests a popular bet that Bitcoin will reach $50,000 in the coming weeks.

Digital assets have benefited from various positive factors, including expectations that U.S. regulators will soon approve the first spot Bitcoin exchange-traded fund (ETF). Historically tight token supply and a supportive macroeconomic backdrop have also played a role, with Bitcoin rallying in harmony with the Dow Jones Industrial Average and S&P 500 amid hopes that the Federal Reserve will cut interest rates several times next year.

Profit Realization Is Evident

There are signs that some crypto traders are realizing profits, but indicators still show that a significant portion of Bitcoin’s token supply is held by steadfast long-term investors. Analysts at digital asset manager CoinShares noted in a Monday note that digital asset investment products ended an 11-week inflow streak.

The $16 million small outflow concentrated in Bitcoin products was stated to be ‘more related to profit realization than a sentiment change towards this asset class.’ If profit realization pressure continues, Bitcoin’s technical market foundation appears weakened, and prices become more vulnerable to further declines.

Alex Kuptsikevich, an analyst at FxPro broker, concluded, ‘We can see that all the rises from the October lows were due to profit-taking. As a result of this scenario, if the market falls below $40,000, there is a possibility of a pullback to the $38,000 zone.’ He added, ‘However, this potentially unpleasant pullback appears to be part of a larger bullish cycle that Bitcoin is currently in.’

Beyond Bitcoin, the second-largest cryptocurrency, Ether, fell by 4% to $2,130. Smaller tokens or alternative coins were even weaker, with Cardano dropping by 7% and Polygon by 8%. Similarly, meme coins were in the red, with Dogecoin falling by 7% and Shiba Inu losing 9%.