Bitcoin is falling - but could still score new all-time highs this year. Here's why.

By Frances Yue

Hello! This is Frances Yue, crypto reporter at MarketWatch, back with the latest installment of Distributed Ledger.

Bitcoin (BTCUSD) fell on Wednesday for its third consecutive day of declines. The cryptocurrency was trading at around $57,000, off more than 22% from its record high at $73,798 reached in March.

The token's decline is somewhat unsurprising, as many traders have looked to take profits after it rallied more than 170% from last October through March this year, noted Jake Ostrovskis, OTC Trader at Wintermute.

While some had hoped bitcoin's so-called halving, which happened on April 19, would boost the crypto's price as it would reduce new supply, that has yet to materialize. With the most recent halving, the reward for miners dropped to 3.125 bitcoins, from 6.25 previously, for verifying a block of transactions on the Bitcoin blockchain.

As a mechanism written in bitcoin's algorithm to control its supply, a halving happens every 210,000 blocks that are mined on the blockchain, or roughly every four years. In previous instances, bitcoin has seen its price appreciate in the months following a halving.

"The halvings have traditionally been a longer-term fundamental catalyst, rather than a short-term one," Ostrovskis wrote in emailed comments.

It is also possible that halvings are now less impactful than they used to be, as bitcoin's price becomes increasingly connected with the larger macroeconomic environment, according to Darius Tabai, chief executive at decentralized crypto exchange Vertex.

Still, bitcoin is yet to peak in its current bull cycle, according to Rennick Palley, founding partner at crypto venture-capital firm Stratos. As institutional interest builds up, "we believe that we are in the midst of a secular crypto bull market that will extend through at least late 2025," Palley said in a call. "Right now is just a period of downside volatility that's common during secular crypto bull markets," he added.

Bitcoin's price performance this year could be compared to that of 2020, Palley said. That year, bitcoin surpassed a prior all-time high of around $20,000, set in 2017. The token later climbed to its cycle high of $68,990 in November 2021.

CZ to spend four months in prison

Changpeng Zhao, the founder and former chief executive of Binance, was sentenced to four months in federal prison Tuesday for violating anti-money-laundering laws while he was running the world's largest crypto exchange.

U.S. District Court Judge Richard Jones was skeptical of the government's request that Zhao, also known as CZ, be sentenced to three years in prison despite federal guidelines suggesting an 18-month sentence, due to his cooperation with the investigation and his status as a first-time offender.

Read more on CZ's sentencing from my colleague, MarketWatch's Chris Matthews.

Roger Ver arrested

Roger Ver, an early investor in bitcoin and now an advocate for Bitcoin Cash (BCHUSD), has been charged with mail fraud, tax evasion and filing false returns to evade at least $48 million in taxes, the U.S. Department of Justice said Tuesday.

Ver was arrested in Spain the past weekend. The U.S. will seek his extradition to stand trial in the country, the Justice Department said.

Ver didn't respond to an email seeking comment.

Crypto in a snap

Bitcoin has fallen 10.9% over the past seven days, while ether (ETHUSD) has declined 20% during the same period, according to Dow Jones Market Data.

Must-reads

Bitcoin is on pace for its worst month since November 2022. Here's what's driving the decline. (MarketWatch)MicroStrategy explains why bitcoin is better than stocks, bonds or gold (MarketWatch)Bitcoin falls after DTCC rules out collateral for bitcoin-linked ETFs (MarketWatch)Federal prosecutors are examining financial transactions at Block, owner of Cash App and Square (NBC News)Hong Kong joins global crypto ETF race (Financial Times)

-Frances Yue

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05-01-24 1714ET

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