Bitcoin (BTC) after a recent rise above the $124,000 mark experienced a cooldown, with the price dropping to around $112,600. According to TradingView data, this represents a decrease of approximately 7% from the highs of a few weeks ago. This development is not a random event, as the entire crypto market struggles with a combination of factors, including profit-taking, massive liquidations, and uncertainty regarding U.S. Fed policy.

Bitcoin faces correction after record highs

One of the key reasons is profit-taking by investors who are realizing gains after a sharp rise. According to Glassnode, the drop has caused every tenth holder to be at a loss. The in-profit supply metric fell from 100% to the current 89%. This pressure naturally leads to selling and short-term corrections, which can shift market sentiment.

Another factor is massive liquidations of over-leveraged traders. Over the past few days, more than $1 billion has been wiped from the market, with 95% of that coming from long positions. The largest losses were recorded by Ethereum with $170 million and Bitcoin with $104 million.

• Invest with Bitcoin responsibly: When investing in Bitcoin, it is important to act responsibly and have realistic expectations. Cryptocurrencies are volatile, so never invest more than you can afford to lose. Diversify your portfolio, use trusted exchanges, and monitor market trends. A long-term approach is generally less risky.

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Why Bitcoin is falling and what will follow?

The question of why Bitcoin is weakening has multiple answers. A key factor is expectations regarding Fed actions. Markets just a few months ago were anticipating aggressive interest rate cuts, but recent macro data have weakened these expectations. The probability that the Fed will not reduce rates in September has increased according to Polymarket from 12% to 28%.

This shift is crucial for Bitcoin. Lower rates make risky assets like cryptocurrencies more attractive. Conversely, if rate cuts are delayed, support for growth weakens. Markets are thus eagerly awaiting the speech of Fed Chair Jerome Powell, who could hint at the future policy direction.

Although the current correction may appear dramatic, analysts say it is not a fundamental trend change, but rather a short-term position reset. History shows that such waves of profit-taking often lead to consolidation, after which further growth may follow.