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Bitcoin price dips 5% to $39,000, leading to the drop of many altcoins in the market

After the rally above $42,600 yesterday, Bitcoin price failed to sustain the bullishness and the bulls shunned the strong resistance at $42,451.67. At the time of writing, BTC is changing hands at $39,623, recorded a 5% drop on the day.

bitcoin-price-drops-5-to-39000-leading-to-the-drop-of-many-altcoins-in-the-market

BTC/USD 4-hour chart | Source: TradingView

It is not clear what causes Bitcoin price to drop

First of all, maybe today’s drop isn’t necessarily from some FUD out in the market. Because it is argued that, a new provision has been added that expands the Tax Code’s definition of the broker to capture nearly everyone in crypto, including non-custodial actors like miners, forcing them all to KYC users.

“This is a deeply misguided provision that, if adopted, will do far more harm than good to U.S. interests,” Chervinsky laying out how the bill could impact the burgeoning crypto industry and market.

The bill, which this week passed a preliminary Senate vote, proposes taxing Bitcoin and cryptocurrency profits to fund U.S. infrastructure investment, with the definition of a broker being widened to the extent that crypto exchanges and wallet providers would need to collect far more information about their users than they currently do.

And because of that, many crypto traders are feeling increasingly nervous due to the $550 billion bipartisan infrastructure bill that’s currently making its way through the U.S. legislature and includes a provision to raise $28 billion from crypto investors. But maybe this FUD is not big enough to push BTC to the current $39,000 zone.

As AZCoin News reported, probably caused by fundamentals, shows that BTC is not yet motivated enough to sustain its rally above $42,000.

The general sentiment in the market has flipped. Also, the Fear and Greed Index, which switched to “Greedy” for the first time in months yesterday, has returned to the “Neutral” zone, or 48.

bitcoin-price-drops-5-to-39000-leading-to-the-drop-of-many-altcoins-in-the-market

Crypto Fear & Greed Index as of August 2 | Source: Alternative.me

Because the price turns down from $39,000, the bulls will attempt to defend the support at $36,670. A strong rebound off this support could keep the pair range-bound between $36,670 and $42,451.67 for a few days.

Meanwhile, CryptoQuant has just had a short-term update on the market. In which, funding rates are trending. Derivate exchange reserves in a downtrend. And finally, spot exchange reserves are in a heavy downtrend. At the moment, stablecoins reserves to jump back in.

“Take a look at USDC reserves since USDT is being altered by all the recent FUD,” CryptoQuant stated.

bitcoin-price-drops-5-to-39000-leading-to-the-drop-of-many-altcoins-in-the-market

Source: CryptoQuant

The market also has positive news such as Jack Dorsey’s Square said its Cash App service’s Bitcoin yearly revenue rose 200% to $2.72 billion from $875 million while BTC’s gross profit jumped to $55 million from $17 million.

Meanwhile, despite the BTC drop affecting the altcoin market, ETH still held the $2,500 level. Part of Ethereum’s price surge could be down to a major upgrade scheduled for August 5, the London hard fork. London will introduce EIP-1559, a piece of code that burns some of the ETH that would otherwise be paid to Ethereum’s gas-guzzling miners.

Some altcoins in the top 10, top 20 CoinMarketCap also show a decrease of 2% – 5% in the last 24 hours like Bitcoin, there is no sell-off because the market sentiment is also at “Neutral”.

The overall cryptocurrency market cap now stands at $1,598 trillion, a 3% deincrease in the last 24 hours. Meanwhile, Bitcoin Dominance is 46.7%.

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