Markets
Bitcoin Cannot Maintain Momentum After Regaining Foothold at $70,000 Earlier in June
With Bitcoin With prices close to three months ago, the leading cryptocurrency by market cap has traded mostly lower or sideways since hitting the $70,000 mark again about two weeks. This roughly 7% drop is likely due to multiple factors rather than a single key incident, experts told Fortune.
One of the reasons why relative stagnation is the plateau of 11 spot Bitcoin exchange traded funds. Interest increased in January after the SEC approved ETFs, which now hold more than $53 billion in total, according to CoinGlass data. However, the bulk of capital inflows took place in the first two months of trading: as of March 13, $55.3 billion in assets had flowed into the funds, meaning they have been growing since then . contracted. Over the past week, net outflows reached $580.6 million.
Harsh mining conditions are another factor holding back Bitcoin’s growth. Bitcoin’s meteoric rise was also propelled by anticipation of April 19. reduce by half, where the supply of newly minted coins was reduced by 50%, from 6.25 to 3.125 per block. As a result, the hashrate – the total computing power used to mine Bitcoin –has been volatile. After the April halving, the rate dived by 11% over the next four weeks, then briefly recovered before falling again.
Matthew Sigel, head of digital assets research at VanEck, told Fortune that this is “typical” instability after the halving, as “miners are struggling to make profits given doubling the cost per part. Sigel said this consolidation phase could continue, but he ultimately predicts that the price of Bitcoin will be significantly higher between now and the US elections in November. He also noted that Bitcoin’s recent movement is typical of a bull market. While the coin is currently in the shadow of its all-time high, following an all-time high, price corrections as strong as 20% are common, Sigel adds. “A drop of 11% is no reason to worry.”
David Lawant, head of research at FalconX, told Fortune that the recent price drop can also be explained by “relatively low liquidity.” For example, Bitcoin’s average daily trading volume in June fell to less than half of what it was in March, in both spot and futures markets. But long-term stagnation is due to macroeconomic and political uncertainties, he says.
Bitcoin is near the lower end of its range as market participants are “still thinking” about where the next price catalyst will come from. Areas of ambiguity holding back investors include the direction of U.S. monetary policy and the upcoming election. In the first case, the Federal Reserve expects interest rates to remain unchanged. higher and longerwhich is at odds with data suggesting that inflation could be cooling. The market is trying to “solve” this problem, Lawant says.
As for the elections, as both parties attempt to court crypto-oriented voters, former President Donald Trump is presenting himself as the “crypto president,” according to Reuters. Last week, during a meeting with Bitcoin miners at his Mar-a-Lago estate, he pledged to “stop Joe Biden’s crusade to crush crypto.” Although a Trump victory would inevitably be bullish for crypto, polls suggest he has just a 1.1% lead over Biden, and this tenuous battle creates an uncertain political backdrop, leaving markets watching and waiting.
More broadly, Bitcoin has made a colossal comeback over the past year, gaining more than 150%.