Nexo CEO Speculates: Bitcoin's Recent Correction May Be Driven by Retail Investors

The price of Bitcoin (BTC) has fallen sharply since January 8, dropping by more than $10,000. Nexo CEO Antoni Trenchev said retail investors may be partly responsible for the decline.

“The price corrections we’ve seen are triggered by retail investors following the institutions that are creating new highs in Bitcoin prices,” he told Cointelegraph on Jan. 11.

“Once the price of Bitcoin exceeded $40,000, gains reached a peak, which triggered a rapid sell-off by small investors, which is understandable. There have been a large number of sell-offs in recent days, and the decline in Bitcoin prices is the result of the accumulation of these trades.”

After breaking its all-time high of nearly $20,000 in 2017, Bitcoin quickly doubled, rising to nearly $42,000 by January 8. In the following days, the digital asset fell by about 28% to nearly $30,100.

Rising prices are often followed by pullbacks, although pullbacks don’t necessarily mean the end of a macro bull run. So, what will mark a top in Bitcoin’s price?

“There are some observable signs that are worth paying attention to. For example, regulation has a strong influence on the market. Regulatory activity that appears to have tightened crypto rules could deter new buyers,” Trenchev told Coitelegraph on Jan. 8.

Over the past few years, U.S. regulators have stepped up their involvement in the cryptocurrency space, which could be a sign of the industry maturing. Several legal responses have recently gained traction, including a proposal from the U.S. government to track digital assets withdrawn from exchanges.

“It’s even possible that some kind of crash has been triggered by overexcitement, though I doubt it’s a big deal,” Trenchev said. “Since 2013, each year’s ‘crash’ has been around 25% of the peak earlier in the year, but now we’re seeing Bitcoin reach unprecedented highs,” he added. “Such corrections are an inevitable side of market behavior,” he said on Jan. 8, referring to a smaller pullback that occurred that day.

Trenchev explained: “When it comes to Bitcoin price action, there are a lot of institutions involved, and rightfully so — however, retail activity is something to watch closely for signs of a market top. Many will panic, take their profits, and exit, which could have a domino effect on the rest of the market.”

In the second half of 2020, Bitcoin attracted the attention of mainstream giants such as MicroStrategy and MassMutual, which may make this bull run different from previous years.