Bitcoin saw a decline of 11.5% over the past month, amid a decrease in investment flows into exchange-traded funds (ETFs) and a slowdown in corporate accumulation, but a recurring daily pattern may be the real main reason.
What happened: According to a detailed analysis by market commentator "Paul Theor", Bitcoin is consistently experiencing a sharp drop right at the opening of the American market, often wiping out hours of gains in just a few minutes. This behavior has been observed since early November and was also present in the second and third quarters of the year.
Market commentators, including "Zero Hedge", suggest that high-frequency trading firm "Jane Street" may be responsible for this pattern. Their strategy is suspected to involve: aggressive selling at market open, pushing the Bitcoin price towards liquidity pockets, then rebuying at a lower price and repeating the cycle to accumulate large volume. This method could allow a deep liquidity and high-speed firm like Jane Street to build a large position in Bitcoin at discounted prices. They are said to currently hold around $2.5 billion of Bitcoin through BlackRock's IBIT fund.
Why this matters: "Pull Theory" suggests that the recent drop in Bitcoin appears to be driven by strategic trading from major players rather than a deterioration of the fundamentals. Once this accumulation phase ends, Bitcoin may resume its upward trajectory.
Crypto trader "Wes" added that Bitcoin remains hovering around $90,000 as markets await the Federal Reserve's decision tomorrow. Traders are looking at an 87% probability for a 25 basis point cut, but Jerome Powell's tone will dictate the next move.
Institutional demand remains strong, as highlighted by the recent purchase of 10,624 Bitcoins by "Strategic", while retail participation remains subdued.
Ethereum, XRP, and the broader altcoin market continue to trade sideways.
With the Federal Open Market Committee (FOMC) decision approaching in less than 24 hours, increased volatility is expected.
A hawkish tone may lead to another drop, while a dovish tone from Powell may spark an immediate rally.
