Bitcoin price drops as supply hits the roof top [Miners sell]
The most popular crypto was seen to take a nosedive on Tuesday in the early trading hours as miners let go their holdings, on a record note, this is the first of its kind since October 2020.
The market supply follows with a sharp decline of 10% off the initial price.
However, economic policy of the United States has been fingered as the major cause.
It can be recalled that America had a change in governance as Joe Bidden took over from Donald Trump on the 20th of January 2020.
As expected, traders and institutions are skeptical of the new Biden’s Administration and would rather wait to see the direction of things before taking further holdings of the coin.
Following the market trend at the early hours of Tuesday, bitcoin reportedly traded at $32,254.59 penultimately, but was seen to slide as low as $30,000 after markets opened in the U.S. on Tuesday morning.
Typically, the price of bitcoin like other commodities is determined by market forces of demand and supply.
The lower the supply the higher the price, the higher the supply the lower the price. It evident that the sharp fall was occasioned by the later.
Miners selling and typical analysis
According to prevailing data from CryptoQuant, a position index ratio above 2.0 indicates that majority of miners are selling.
It has been reported that the current index ratio hits an eight-year high last week and may still take a leap.
While amongst other arguments suggesting why miners are selling in huge proportion, to meet operational costs however appears to form one of the leading factor.
In a major report, Neil Van Huis, director of sales and institutional trading at Blockfills remarks as follows;
“With a need to allocate capital to more mining rigs, taking bitcoin off of their balance sheet for cash at three or four times higher prices 30-60 days after the wet season ended in China was about the best scenario miners could have asked for.”
Why the price dropped
Typically, institutions have soft pedaled in bitcoin purchase given to the fact that they are trying to get an indicator to the new Biden Administration policy on cryptocurrency to further inform a choice of action going forward.
For example, there has been a few negative comments from the U.S. new treasury secretary “Janet Yellen” which significantly place worries into a new possible control measures the new Administration may adopt/introduce on cryptocurrency.
Bitcoin price drop apparently indicates a number of factors, excess supply without corresponding buyers as miners decide to let go of holdings, occasioned by the American new Administration body language, as whether there will be a stiff measure introduced in the control and regulation of the cryptocurrency market.