Bitcoin prices have crashed more than 18% after reaching an all-time high of around $74,000 last March, leaving crypto investors worried about a potential bear market. According to analysts, the latest decline in Bitcoin prices comes on the back of large-scale investors, commonly referred to as crypto whales, selling more than $1 billion worth of Bitcoin in the last couple of weeks alone. According to Neil Roarty, analyst at Stocklytics, retail investors may follow these crypto whales to cash in their profits in the coming weeks, creating more selling pressure for the world’s most popular cryptocurrency. According to data from FactSet, from last Wednesday to Sunday, Bitcoin withdrawals surpassed Bitcoin deposits by more than $520 million, a clear indication of investors already taking their money away from the cryptocurrency.

BTC's Volatility Is Nothing New

Bitcoin prices have often been volatile in the past, but in general, prices have trended higher in the long run. Bitcoin reached a high of $62,000 in November 2021 before crashing to just $15,000 in December 2022. Although Bitcoin recovered from these lows in 2023, the market witnessed sideways trading for most parts of 2023 with Bitcoin failing to break through the resistance at the $30,000 mark until last November. When this happened, Bitcoin entered a bull run that took prices to well above $70,000 in less than 6 months.

There are several reasons behind the perceived volatility in Bitcoin prices, including the limited Bitcoin supply of 21 million coins, the speculation behind cryptocurrencies which stems from the growing interest in cryptocurrencies among retail investors, and uncertain regulatory conditions surrounding Bitcoin and other digital assets.

A Difficult Road Ahead?

The latest Bitcoin halving that occurred on April 19 should support higher prices in the long run. Bitcoin halving refers to the phenomenon where the reward for adding new Bitcoin to the blockchain will halve every 210,000 blocks. The past three halving incidents before 2024 occurred in 2020, 2016, and 2012, so a halving can be expected every four years. According to data by 10x Research, Bitcoin prices have rallied 16%, on average, in the first 60 days since halving in the previous three instances. This time around, the opposite has happened with Bitcoin losing ground, but a typical Bitcoin peak occurs roughly 500 days after the halving event, which means investors can be hopeful of a stellar recovery in Bitcoin prices in the next couple of years.

Looking at the long term, the increased adoption of Bitcoin among both retail and institutional investors, technological advancements that are poised to lower transaction fees, and favorable regulations should boost Bitcoin prices.

Neither Dilantha DeSilva nor Stocks.News have positions any of the securities covered in this article.