Why is Bitcoin price down today?

Smartphone with bitcoin bearish trend concept between hands of a woman in the background.

NOIDA (CoinChapter.com)— Bitcoin price dropped below $57,000 for the first time since Feb. 2024 as the overall crypto market plunged more than 6%. Recent legal and regulatory updates in the sector combined with on-chain bearish cues might be the reason why the Bitcoin price is down today.

Bitcoin price action over the last seven days. Source: Co i nStats

BTC price dropped nearly 13% since April 30 to reach a daily low near $56,500 on May 1 before recovering slightly.

Regulatory Actions Could Be Why Bitcoin Price Is Down

Major legal developments involving two high-profile figures, Changpeng Zhao (CZ) and Roger Ver, have rocked the cryptocurrency market.

A US court sentenced the Binance founder to four months in jail for failing to implement adequate anti-money laundering measures. Simultaneously, authorities indicted Roger Ver, an influential crypto advocate and investor. These events triggered a wave of uncertainty and risk aversion among investors.

Legal actions against such prominent individuals sent ripples across the entire sector, undermining investor confidence and fostering apprehensions about potential regulatory interventions.

CZ sentencing and macro headwinds pummeled BTC price.

The immediate reaction often involves a sell-off by stakeholders looking to mitigate risk, which can exacerbate price declines. Furthermore, these legal issues may impair the operational capabilities and liquidity of key market players, intensifying the bearish sentiment in the market.

Moreover, the newly launched spot BTC ETFs in Hong Kong failed to impress market participants. Similarly, US spot Bitcoin ETFs experienced significant outflows, with over $51 million withdrawn on the fourth consecutive day of losses.

The largest outflow reached $435 million over three weeks. Notably, the ARK 21Shares Bitcoin ETF and the Grayscale Bitcoin Trust saw significant withdrawals.

In contrast, the Bitwise Bitcoin ETF and others like the Valkyrie and Franklin Bitcoin ETFs recorded net inflows, showcasing mixed investor sentiment in the ETF sector.

Bearish On-Chain Cues

A recent report from on-chain data provider Glassnode highlighted several bearish indicators that might influence Bitcoin’s price movements. Glassnode analysts noted the frequent occurrence of local bottoms during recent price movements, suggesting a lack of sustained upward momentum.

Bitcoin Realized loss by short-term and long-term holders. Source: Glassnode

Additionally, the ‘Realized Loss‘ metric indicates that short-term holders locked in significant losses, which underscores the selling pressure during downturns.

Moreover, the Market Value to Realized Value (MVRV) ratio has dipped below 1.0 multiple times recently, indicating that Bitcoin’s market value is less than its realized value. The MVRV metric is crucial as it suggests that Bitcoin is currently undervalued or facing downward pressure.

Bitcoin MVRV chart.

The dominance of realized losses by short-term holders, in particular, signals a market driven by quick sell-offs, likely contributing to Bitcoin prices’ volatility.

In conclusion, Bitcoin’s current market stance is shaped by a confluence of adverse legal developments and bearish on-chain signals.

As investors and analysts watch these developments unfold, the coming weeks are crucial in determining whether these trends will persist or if the market will find new catalysts for recovery.