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    Bitcoin’s price drop and market reactions: an analysis of recent trends and trader sentiments

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    Bitcoin’s price fell 8.2% over four days from its all-time high of $99,609 on Nov. 22, resulting in $250 million worth of optimistic leveraged positions being liquidated. Despite the dip, there wasn’t any panic among traders, and the event didn’t indicate a market flip. Bitcoin miners, who collectively hold around 1.8 million Bitcoins valued at $166.3 billion, have been selling off their holdings. Concurrently, Bitcoin spot exchange-traded funds (ETFs) in the US averaged an inflow of $670 million daily between Nov. 18 and Nov. 22. Despite potential future price falls, the general market sentiment remains optimistic.

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    After hitting its highest ever price of $99,609 on Nov. 22, Bitcoin saw an 8.2% drop over the following four days. This dip ended up in about $250 million worth of optimistic leveraged positions getting liquidated. However, there wasn’t any panic and this didn’t make things look gloomy.

    Just so you get an idea, there was a 22.6% price rise between Nov. 9 and Nov. 13. This led to an even bigger $342 million liquidation. So the recent price fall doesn’t necessarily imply a market flip. It just shows how things are often boosted way too much, like a hot balloon, among traders.

    The fact that Bitcoin didn’t cross the $100,000 mark doesn’t seem to have affected the spirit of investors much. It’s important to look at what Bitcoin miners are up to in order to understand this. Collectively, they hold about 1.8 million Bitcoins which is valued at a massive $166.3 billion. Also, each block that they mine gives them 3.125 Bitcoins.

    According to recent data, miners have been selling their Bitcoins worth roughly $231 million a day, about 2,500 Bitcoins. However, Bitcoin spot exchange-traded funds (ETFs) in the US have been seeing an average inflow of $670 million daily from Nov. 18 and Nov. 22.

    Many might think that Bitcoin’s failure to cross $100,000 is due to miners selling their stocks. But this doesn’t fully hold up. Giant software-cum-digital-assets company MicroStrategy announced a massive $5.4 billion Bitcoin purchase on Nov. 25. This shows institutions are still keen on Bitcoin.

    Remember, long-term holders often contribute to selling pressure too. We’ve seen this before. Around late March, there were many failed attempts to push Bitcoin past $73,500. This prompted some big stakeholders to cash in, starting a two month downward trend which bottomed out at $60,830 on May 1.

    Can we expect Bitcoin to hit a low of $82,500? If we follow past trends, it’s possible. Such a 17% drop from its all-time high is normal and very far from indicating a period where prices will keep falling. For comparison, the US spot Bitcoin ETF holdings barely changed when Bitcoin corrected between March 14 and May 16, and MicroStrategy made a single purchase of 24,400 Bitcoins.

    However, things look a bit different now. Spot ETF buying remains high and other big institutions are following MicroStrategy’s strategy. Examples include Japan’s MetaPlanet, US’s Semler Scientific, and Marathon Digital, a top Bitcoin miner. This suggests that more corporations are investing in Bitcoins which could help maintain its price.

    Sure, we can’t predict whether they’ll keep buying Bitcoins, but there’s strong market confidence. After all, it seems like Microsoft’s shareholders are also thinking of a similar strategy.

    If large stakeholders and traders anticipate a price fall, hedging costs go up, causing the put-to-call ratio to go above 6%. The most important thing here is the 25% delta skew which typically ranges between -6% and +6% in stable markets. If it goes beyond this range, it indicates too much fear or optimism.

    Evidence from the options market shows this resilience. The optimism during Nov. 16 to Nov. 26 has calmed down. The sell and buy options now trade at pretty much the same premiums which means the market sentiment is neutral. However, other market indicators aren’t indicating any stress or signs of a bear market. This means the forecast for Bitcoin’s price remains optimistic.

    Remember, this article is just for your general knowledge. It’s not legal or investment advice. The views, thoughts, and opinions here are of the author only and don’t necessarily represent those of Cointelegraph.

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