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BTC halts: why is bitcoin going down?
BTC halts: why is bitcoin going down?
Bitcoin

BTC halts: why is bitcoin going down?

By Marco Cavicchioli - 4 Jan 2021

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Prices falling today: why is bitcoin going down? 

Until yesterday, the trend was an impressive ride that had led it to exceed $34,000

Analyzing the last three months, it has been an almost constant increase, started at about $10,000 at the beginning of October 2020, passed through $20,000 in mid-December, and ended at over $30,000 in these early days of 2021. 

To be fair, it is by no means a foregone conclusion that this ride has stopped today: today’s drop could also just be a temporary setback

In other words, every now and then the price of BTC undergoes a correction even in the middle of an upward trend

It already happened at the end of November, when it went from $19,000 to $17,000 in one day, or in December, when it twice lost $1,000 in 24 hours. 

However, there are some current conditions that could suggest a more significant and lasting drop this time. 

First of all, the parabolic rise of the last few days. In fact, in just over two weeks the price has gone from $20,000 to $34,000, a +70% in 19 days that could also have the appearance of a speculative mini-bubble. 

Why is bitcoin going down? A glance at the past

Then again, something similar, albeit on completely different levels, had happened between late 2016 and early 2017, when in 15 days the price had increased by 38%. 

The parallel with 2016 is logical because that year too there was a halving, as in 2020. Given that there have been only three halvings of Bitcoin (2012, 2016 and 2020), and given that in those three years the trend of the price of BTC after the halving was in some ways similar, it may make sense to analyze the trend of late 2016 and early 2017 to get an idea of what might happen in this early 2021. 

Back then, the correction began on January 5th and ended on January 12th with a 28% loss in 8 days. 

In fact, it is possible that at the beginning of the year the selling pressure is greater, compared to December, especially in the case of an uptrend. 

Those who make a profit in December, if they sell and collect capital gains, they may have to pay taxes. If they decide to delay their sales by even a few days, they will still have more or less the same taxes to pay, but they will pay them 12 months later. Therefore it is possible that in December the selling pressure, in case of an increasing trend, will be reduced, and increase in January. 

To this should be added that when prices are particularly high, if they stop growing many investors may prefer to sell and monetize the gains, rather than wait and increase the risks. 

This could favour a retracement at the beginning of 2021, although it is not at all certain that, if it were to occur, it would not be followed by further increases, as for example happened in 2017. 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 25 thousand subscribers.

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