Why is Bitcoin down today? Here are three key drivers of the $113,000 drop

Why is Bitcoin taking a downtrend over the past week, failing to hold up its recent gains and positive momentum.

Bitcoin ( BTC ) is currently trading at $113,721, posting a modest 1.5% drop in the last 24 hours. The day’s decline brings its losses on the week to approximately 5%, now putting the crypto market giant in the red for this month.

Bitcoin’s price chart | Source: crypto.news

The current price level marks a strong reversal of BTC’s upward run just weeks ago, when it led the crypto market in a brief rally that saw it claim a new all-time high of $124,128. But what’s driving the decline in price?

Bitcoin drop fueled by profit-taking and short-term holders 

Post-rally exhaustion and profit-taking have been major drivers of BTC’s decline. After the recent surge above $124,000, many long-term holders took the opportunity to lock in gains. While such sales are common in market cycles, large-volume moves often put downward pressure on price.

At the same time, short-term Bitcoin holders are selling at a loss. A recent CryptoQuant analysis shows that around 50,026 BTC, worth roughly $5.69 billion has flowed from new investors into exchanges over just two days, suggesting panic selling among investors who are unfamiliar with market volatility. 

When these large-scale dumps occur, it increases selling pressure, accelerating price declines. But beyond retail, institutional players are also trimming exposure.

ETF outflows deepen as BTC wobbles

An ongoing three-day streak of outflows in Bitcoin exchange-traded funds is adding further pressure on prices. According to data from SoSoValue, the 12 U.S.-listed funds recorded $523 million in net outflows in their latest trading session, bringing total losses over the streak to nearly $660 million.

The outflows reverse last week’s positive performance, when the funds had attracted several million in inflows day after day. Sustained ETF outflows often translate into negative price action, and the current trend is further amplifying Bitcoin’s already fragile momentum.

Alongside the profit-taking and ETF outflows, weakening demand is also weighing on Bitcoin.

Cooling demand and market sentiment 

Another CryptoQuant analysis shows that overall demand growth in BTC has slowed, including purchases from ETFs and corporate buyers. On-chain data shows that funds are not flowing into Bitcoin currently as they previously did, adding to the overall negative pressure.

At the same time, retail sentiment has turned negative. Data from Santiment shows that traders have flipped bearish as Bitcoin slips to $113,000, with social media registering the most pessimistic outlook since June 22, when geopolitical fears triggered panic selling. This is amplifying the cautious mood around Bitcoin’s short-term trajectory.

Despite the bearish signals, some analysts remain optimistic.

Is Bitcoin setting up for another rally?

Technical analyst Rekt Capital says Bitcoin is currently following a pattern seen in past cycles, suggesting that there is room for recovery and growth. According to his analysis, similar pullbacks occurred at the same stage of the cycle in 2017 and 2021. 

In both cases, the dips were followed by rallies that pushed Bitcoin to new all-time highs.

If history repeats, the current pullback could act as a reset before another move higher, rather than the start of a prolonged downturn.