Bitcoin Price Plunges: What's Causing the Drop?

Bitcoin (BTC) is experiencing a sharp decline, falling below the $61,000 mark after failing to hold its support above $60,000. Analysts are concerned about a potential major correction if Bitcoin cannot maintain its support level of $56,000. The decline comes amidst cooling PCE data, which shows a lower-than-expected inflation rate. However, Bitcoin's price action has not shown much response to this economic news. U.S. government activity is also adding to market uncertainties, as a government-associated address moved 11.84 BTC to a new address, potentially signaling larger moves. This action can cause investor unease and contribute to fears about large-scale sell-offs, putting downward pressure on Bitcoin prices. Market analysts are worried about weakening support for Bitcoin below $60,000. CryptoQuant indicates a critical support level at $56,000, which if breached, could lead to a significant price decline. Decreasing demand from long-term holders and U.S. investors, coupled with a drop in trading volume and open interest, are also contributing to Bitcoin's price fall. Long-term BTC holders have been reducing their holdings throughout 2024, with significant sell-offs observed in May and June. Trading volume has decreased by 12.84%, indicating low market turnover and trader interest, which can lead to low liquidity and high volatility. Open interest has also declined, suggesting fewer contracts are being held or opened. However, options open interest has increased, which could be attributed to trader uncertainty.