itcoin and other major cryptocurrencies saw steep declines that collectively erased over $400 billion from total crypto values. On March 20th specifically, Bitcoin dipped below $61,000 - a notable pullback from its record high of just under $73,800 set only weeks prior. The entire cryptocurrency market shed more than 15% of its value over this volatile period.
Profit-Taking Sparked Downtrend
With Bitcoin up over 120% in the last year alone leading into 2024, many analysts pointed to profit-taking as a core driver of the steep correction. Traders who purchased Bitcoin and other coins over the last 12 months were eager to lock in sizable gains as prices hovered near new all-time highs. Data from CryptoQuant showed a massive increase in short-term holders selling their positions in mid-March specifically. This supply pressure combined with reduced buy demand pushed prices sharply lower across the board.
Grayscale Bitcoin Trust Outflows Added Downward Pressure
The Grayscale Bitcoin Trust (GBTC), the largest Bitcoin investment vehicle, also saw significant outflows worth over $640 million in a single day according to BitMEX Research. As the first ever Bitcoin ETFs launched in the United States in January 2024, some momentum had come out of investment products like GBTC which are criticized for higher fees than ETF alternatives. The large sell event from GBTC exerted additional selling pressure on Bitcoin prices already under pressure from widespread profit-taking across the crypto sphere.
While the mid-March selloff represented one of the largest price corrections ever seen in the relatively young crypto economy, many experts argue short-term fluctuations are a normal occurrence in maturing bull markets. If Bitcoin manages to hold above key support in the $50-52k range, the dominant coin's long-term bullish trajectory is likely intact despite the bouts of volatility. As with any emerging asset, crypto market participants can expect periodic but substantial price drawdowns to shake out weak holders alongside the continued growth of the overall sector in the long run.
