Bitcoin wobbles: in three months, it has plunged by 30%, falling from $109,590 to $77,040. Bitfinex dissects this debacle.

Behind the sawtooth graphs, a story unfolds: panic among small holders, desertion of institutions, and a macroeconomy that creaks.

Bitcoin (BTC) price has fallen sharply in recent months, and analysts at cryptocurrency exchange Bitfinex have been examining the factors that may be contributing to the downturn. In the past three months alone, Bitcoin has plunged by 30%, decreasing from a high of $109,590 to a low of $77,041.

However, the coin has since rebounded by 9.5%, bringing BTC to $84,357. Still, Bitfinex warns that the rebound is fragile and may be quickly reversed if the “whales” do not return to absorb liquidity and calm nerves.

While crypto ETFs were designed to stabilize the market by increasing participation and reducing volatility, the past week has seen $920 million in value disappear from these funds as they are quickly integrated into institutional portfolios. However, Bitfinex notes that these funds are designed to buffer the market from massive sales.

Moreover, consumer confidence in the American economy has fallen to its lowest level since the beginning of 2022, with the University of Michigan consumer confidence index for December coming in at 64.6.

The Federal Reserve is now predicting a GDP decline of 2.8% at the beginning of 2025, while economists polled by Dow Jones anticipated a smaller decrease of 2.1%.

The Fed’s forecasts also project inflation to rise to 3.7% by the end of 2024, remaining elevated despite the central bank’s aggressive interest rate hikes.

As the trade war continues to heat up, the broadest measure of consumer prices is expected to moderate to 2.6%, a decline from the 3.1% predicted in the previous forecast.

The crypto market has been particularly volatile in recent months, and Bitcoin price is still down sharply year-to-date. However, the coin has recovered somewhat from its recent lows, and it may be able to rise further if the institutional buyers return to the market.