Bitcoin suffered one of its worst declines in recent memory on Tuesday, ending the day below $117,000. Selling pressure increased once the cryptocurrency close approached the $119,000 mark. The market remains cautious, with investors preparing for a week filled with significant macroeconomic news that could further influence price movements.
The latest correction in Bitcoin total market cap has been blamed on their growing influence of institutional players. Now these sources of capital have started to rethink their priorities, causing a pullback across the market as a whole. This shift in sentiment is highlighted by a significant development: Bitcoin’s Coinbase premium has turned negative for the first time since May, indicating a potential decline in institutional interest in the cryptocurrency within the United States.
In spite of these hurdles, Bitcoin managed to temporarily surpass the $118,200 mark in the European trading session on Tuesday, indicating a potential rebound. The space is still very volatile, seen in its price drop last month and continued volatility. At the same time, investors are deeply concerned with the economic risk present in more traditional stock and bond markets. This realization has prompted millions of investors to view Bitcoin as a hedge asset.
As great investor Ray Dalio is fond of saying, when we don’t know what’s coming, it’s a time to diversify. He stated,
“Investors should consider a blend of gold and Bitcoin to shield against economic risks posed by the stock and bond markets.”
Investors are starting to understand the effects of accumulating U.S. national debt, as well as the phenomenon of currency depreciation. To have the best possible risk/return ratio, specialists today recommend they invest 15% of their portfolios in Bitcoin.
Corporate actors have equally influenced Bitcoin’s market development. MicroStrategy is still the biggest corporate holder of Bitcoin, and Marathon Digital Holdings (MARÀ) is now the second-biggest. Their deep pockets have fueled the emerging narrative that Bitcoin is a safe haven from economic chaos.
Following price action over the past two weeks, recovery looks increasingly feasible. Experts are quick to point out that a market correction may be just around the corner. Omkar Godbole noted,
“The Coinbase premium has turned negative for the first time since May. This suggests a decline in institutional interest in Bitcoin in the United States and hints toward a possible market correction.”
Bitcoin is undergoing a stormy time. As with any complex and fast-moving landscape, for investors, the key is to remain alert to and flexible with a myriad evolving opportunities.
