3 Reasons Why Bitcoin Price Could Fall Below $100,000

Bitcoin’s price recently dipped below $100,000 due to geopolitical tensions but rebounded to $108,000. However, investor confidence is waning, especially in derivatives markets. There are concerns stemming from the US trade war, economic setbacks, and significant moves by firms like Bit Digital looking to shift away from Bitcoin. The potential for a temporary price dip below $100,000 persists amidst this uncertainty.

Bitcoin’s price, after a brief scare, dipped below the $100,000 mark recently, sparked by geopolitical tensions, specifically Iran’s strikes on US military installations in Qatar. It bounced back to around $108,000, but the mood among investors seems a bit dim, particularly in the derivatives market. Some traders are worrying about the sustainability of Bitcoin’s recent gains. Let’s break it down: why is there a jitters in the Bitcoin space regarding a potential price drop?

The funding rate for Bitcoin perpetual contracts, a kind of measure for market sentiment, nosedived to its lowest point in about seven weeks on Wednesday. In typical market conditions, long positions, or bets that the prices will rise, often require maintenance payments. So, to see negative rates in a rallying market is definitely strange. This could indicate that investors are more sceptical than optimistic, pointing to waning demand for leveraging their positions. And what’s driving this nervousness?

Well, the ongoing US trade war is definitely a part of the picture. Since it kicked off back in April, there have been attempts at ceasefires, but some agreements, especially one with the eurozone, are on the verge of ending—July 9 is the deadline. President Donald Trump’s erratic trade policy changes—over 50 since taking office, according to one Washington Post analyst—have left investors on edge. The fear that the situation could escalate further certainly doesn’t help.

Additionally, the US economy recently posted a disheartening 0.5% drop in GDP year-on-year for the first quarter, as per the final figures released on Thursday. This has been largely blamed on a massive trade deficit, as companies stocked up in anticipation of tariff hikes, which only adds to the gloom for traders.

What’s adding to the frustration is that while Bitcoin has struggled to hold above $112,000, US small-cap stocks seem to be doing just fine. The Russell 2000 index, which leaves out the bigger firms, has soared to a four-month high. Given that many investors still regard Bitcoin as a risk-on asset, concerns about unsound spending in the AI sector, which is driving up valuations, are creating a sort of ceiling on Bitcoin’s potential rise. Gartner analysts voiced concerns, as per Yahoo Finance, about many AI initiatives being premature experiments or hype-driven. Hence, it’s reasonable to expect some profit-taking above the $105,000 mark.

Moreover, the landscape is complicating itself, with more firms choosing to add Bitcoin to their balance sheets. A significant development emerged from Bit Digital, a Bitcoin mining company listed on Nasdaq, which declared it plans to sell its Bitcoin assets and mining infrastructure to switch gears towards Ether instead. As of late March, they held significant quantities of both ETH and BTC, so this decision raises worries that other miners might also consider cashing out their Bitcoin, especially since mining earnings have dipped to a two-month low, according to a report from CryptoQuant.

Although overarching macroeconomic conditions could still pave the way for Bitcoin to hit record levels, the potential for a temporary dip below that crucial $100,000 threshold remains quite plausible.

This article is meant for general informational purposes and should not be construed as legal or investment advice. The opinions expressed herein are solely those of the author, not necessarily reflecting the views of Cointelegraph.