Key Points
- Bitcoin’s price dropped below $93k due to declining whale demand, with El Salvador buying the dip.
- The wider altcoin industry followed the bearish sentiment, led by Ethereum and Ripple Labs.
After an unsuccessful bullish breakout above $98k last week, the price of Bitcoin (BTC) slipped below a key support level of $95.5k on Monday, nearing the lower end of a possible horizontal range of about $92k. Over the past 24 hours, Bitcoin’s price fell by over 3 percent, trading at approximately $92.7k.
This caused the wider altcoin industry to follow suit, led by Ethereum (ETH) and Ripple Labs’ XRP. Current market data shows that the total crypto market cap slipped over 6 percent to around $3.1 trillion, triggering net forced liquidations of over $730 million.
Why Did Bitcoin’s Price Drop?
Crypto analyst Ali Martinez suggests that to avoid a major selloff towards $75k in the coming weeks, Bitcoin’s price must remain above the $92k support level.
The price of Bitcoin has experienced bearish sentiment since the inauguration of US President Donald Trump mid-last month. The ongoing tariff trade wars have created short-term uncertainties in the wider global markets. This has led to a significant decline in the overall cash inflow to Bitcoin and related products, such as US spot BTC ETFs, over the past few weeks.
Market data from Glassnode shows that the net capital inflows to the crypto market fell from $52 billion to about $26.5 billion in the past 10 days. The US spot BTC ETFs recorded a second consecutive weekly cash outflow of about $559 million, impacting bullish sentiment.
El Salvador’s Strategic Purchase
Recent crypto hacks on major crypto exchanges, including Bybit, have diminished the confidence in the Web3 space of institutional investors. Despite the favorable regulatory environment in the United States, the fear of further sophisticated hacks on Web3 protocols has reduced overall confidence in blockchain security.
After pausing daily Bitcoin purchases in recent days, El Salvador completed a strategic purchase of 8 BTCs, worth about $750k, late on Monday. As a result, El Salvador now holds approximately 6,088 BTC, valued around $564 million.
Nayib Bukele, the President of El Salvador, dismissed the short-term bearish volatility and investors not convinced of BTC’s long-term prospects. Bukele joined Strategy (NASDAQ: MSTR) in Bitcoin purchases, regardless of the short-term bearish outlook.
El Salvador believes other nations, led by the United States, will eventually adopt Bitcoin for their strategic asset reserve. Moreover, more nations are struggling with high debt-to-GDP ratios and gold has not performed well enough to hedge against global inflation.
