While one macro-event that precipitated the decline was China’s central bank declaring crypto-related activity unlawful, the market has been displaying indications since the flash crash.
Notably, Bitcoin’s price began hitting a series of lower highs from the $50K psychological barrier mark this month, indicating a slowdown of the bullish momentum.
Furthermore, BTC’s daily chart’s Relative Strength Index (RSI) showed a steep slope, indicating the onset of selling pressure.
An examination at Bitcoin’s Spent Output Profit Ratio (SOPR) indicated a notable decrease in SOPR began on August 14, when SOPR began to form lower tops.
The SOPR gives insight into macro market mood, profitability, and losses during a specific period. It also indicates the amount of profit gained for Bitcoin transferred on-chain.
Furthermore, Bitcoin addresses with non-zero balances have been declining since September 13, while new addresses that have been declining since September 7 have begun to decrease. This indicated a decrease in the number of fresh entrants into the BTC market.
Despite recent market fluctuations and a sharp decline in Bitcoin’s price, Spot Reserves have continued to fall. A drop in Spot Reserves is expected to push the price trend upward when looking at the long-term picture.
Furthermore, while there were large inflow increases following the news of China’s crypto prohibition, outflows also surged temporarily, which might imply that some investors purchased the drop and expected higher prices shortly.
Bitcoin was trading at $42,700 at press time, up over 1.1 percent in only two hours. Furthermore, the 100-day moving average near $40,000 may give a short-term price cushion and is expected to function as solid support.
However, with BTC’s price making lower lows on a shorter time frame, a fast rebound in the immediate term is improbable.