After reaching a peak of $49,000, Bitcoin (BTC) experienced a significant drop, with losses multiplying in the following days. Large sales by whales and increased GBTC sales foreshadowed the downturn. Investors are now rushing to sell in panic, a strategy that historically yields poor outcomes in the cryptocurrency market.
Investors often fail to realize that constant ups and downs are not characteristic of any market, and this realization could help reduce panic. If BTC surpasses $50,000 in the coming weeks, triggering a 40% gain in altcoins, those who sold at a loss will likely buy back at higher prices in a state of panic, leading to a cycle of buying high and selling low.
Even in the best-case scenario, investors who enter the market at the wrong time may not lose money but do lose time. However, gradual buying and selling at satisfactory levels can ensure modest but consistent profits.
The current decline in crypto is partly due to macroeconomic factors, such as the strengthening U.S. dollar, which recently gained momentum, and significant spot BTC sales. Another major factor is the billions of dollars decrease in Grayscale BTC reserves due to GBTC sales.
Analysts are now pricing in a higher chance of the Federal Reserve (Fed) successfully reducing inflation without causing a recession, though optimism about interest rate cuts has waned. Additionally, U.S. Senator Elizabeth Warren’s recent comments on cryptocurrencies being used to circumvent U.S. sanctions add to the long-term negative outlook. Short-term risks like large sales and GBTC outflows could reverse quickly, potentially revitalizing the market.