After all the talk of Bitcoin breaking away and January being a record-breaking first month of the year, investors were a little stunned when the price of Bitcoin blipped and dropped down steeply. Around $500 was shed in as little as five minutes as Bitcoin went from nearing $9,000 again to hovering around $8,500.
The price movement of Bitcoin since the end of January has been keenly watched with many investors and commentators stating that a big bullish run was on its way. In fact, Peter Brandt even called the bottom back near $3,000, but this sudden plunge could make investors nervy.
The long term factors driving the price of Bitcoin are still positive, and most of the catalysts that were pegged as the reason for Bitcoin’s price gain are still good, but it may be that the upward trend is taking a small dip before carrying on, or in fact that the recent rise was a bit of a bull trap.
What’s driving the big rally?
One of the main reasons investors are eyeing a big rally out of Bitcoin in the coming months has to do with the mining reward halving due in May. This event is being closely watched as the feeling is that with the supply cutting down 50 percent the demand is set to skyrocket along with the price.
With the lead up to this event, Bitcoin will become more scarce so the demand should in fact rise before then which would also probe the narrative that Bitcoin should be gaining big in the coming months. If history is to be believed, the price of the coin should go as high as $400,000 at the top after the halving.
Although, some believe that the halving may not be as fundamentally pegged to macroeconomic policies and that betting on the halving being the reason for a massive rally might be misplaced.
Altcoins going down too
One catalyst that was looked at as the reason for Bitcoin rallying in January was also some good price action from Altcoins that could well have sparked off a bit of excitement in the market. Dash, as well as Bitcoin SV, made big strides before Bitcoin made it to $9,000 with the Bitcoin fork even doubling its value in a day.
Now, the Altcoins are also faltering along with Bitcoin, and those that were doing well – like Bitcoin SV – are falling rapidly with that particular hard fork being heavily influenced by the actions of its head, Craig Wright.