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On September 7, Bitcoin fell by 11.01 percent, while many altcoins fell by a similar amount. However, the market’s recovery has been gradual since the breakout, as a lack of drive has left it drifting sideways.
With the majority of the community still struggling with the fallout, there are numerous unresolved issues. If you examine closely, though, you will discover that the catastrophe was not altogether unexpected.
Indeed, data suggests that Bitcoin is resembling prior corrections in 2021.
Is Bitcoin reacting negatively to external factors?
To draw parallels with BTC’s recent collapse, the crypto-April asset’s breakthrough was examined. This implied that after Coinbase shares began trading, Bitcoin had a significant sell-off after the market peaked. As a result, it was more of a cross-over occurrence, in which the consequences of one circumstance impacted the other.
It is important to notice that the breakout has always occurred after Bitcoin has peaked within that time frame.
Bitcoin peaked at $64k in April before falling to $49k. BTC recently reached a local high of $52.8k before sliding below $45k.
This time, however, the cross-over event happened with respect to NFTs.
Did NFTs slow down triggered BTC sell-off?
For a few weeks now, the NFT market has been in a state of frenzy. Unfortunately, NFT activity began to decline during the recent Sotheby auction. The number of active wallets doubled on September 2nd, as did daily NFT sales. These numbers were collected 48 hours before the collapse, which coincided with the market and Bitcoin seeing an 11 percent drop.
Ethereum may have also played a role, as the token’s price became more sensitive to NFT activity. In reality, ETH/BTC began to fall together with the NFT market.
How reliable is this domino effect?
Right now, it’s tough to say with certainty that the NFTs market crashed BTC’s daily market structure. A few of causes for the drop can also be linked back to the fact that on-chain indicators had been gloomy for weeks and liquidity on the sale side had once again surpassed liquidity on the bid side.
Hence, the declining NFTs market might have been the last nail in the coffin for Bitcoin, rather than being the primary catalyst. Technicals, on-chain, and sell-side liquidity already had the market weak and the drop in NFT activity took out the last ounces of bullish momentum.
So, Bitcoin might have reacted poorly to NFTs slumping. Even so, it was never not expected for Bitcoin to undergo corrections after its rally.