In last week's weekly briefing, we reported on the analysis that Bitcoin's upward engine appears to have turned off again. This week, the price of Bitcoin fell by about 3%, drawing a gentle downward curve due to inertia, literally like a car with the engine turned off.
By mid-June, the price of Bitcoin was in a range between $67,000 and $70,000. This was a time when it was predicted that the U.S. Federal Reserve would cut interest rates at least twice within the year. However, expectations of an interest rate cut were damaged as the Federal Reserve predicted this to be a one-time event at the Open Market Committee (FOMC) meeting in June. This is the first factor in Bitcoin's decline this week.
Another problem came with a time lag. Mining companies, whose profits were deteriorating due to the Bitcoin halving, began to dispose of their Bitcoin holdings. The market had expected this to happen in May right after the halving in April of this year, but the market impact was delayed as projects that significantly increased Bitcoin network fees, such as Loon Protocol, received positive response.
Bitcoin analysis by cryptocurrency on-chain data platform CryptoQuant explains this well. For complex reasons, a market has been formed where no one buys Bitcoin and only those who sell Bitcoin. Long-term Bitcoin holders have sold over $1.2 billion worth of Bitcoin in the over-the-counter market over the past three weeks . During this period , hundreds of millions of dollars in funds also flowed out of the U.S. Bitcoin spot ETF market .
CryptoQuant predicted that the price of Bitcoin could fall to $60,000 due to weakening momentum . Of course, since the selling trend has not yet erupted in earnest, there is a possibility that the decline will end when a new range of $63,000 to $67,000 is formed.
In this regard, it is worth paying attention to the price movements of the past 20 days. The price of Bitcoin, which fell to the $64,800 level on this day, rose to the $66,400 level ahead of the UK interest rate announcement, but when the decision to freeze interest rates was made, the price could not be supported and fell again. Ultimately, although it is not reflected as astutely as in the past, global liquidity seems to be the most important factor to pay attention to regarding Bitcoin price trends for the time being.
When Bitcoin falls 3%, Solana falls 9%
For a while, the weekly briefing did not cover altcoin-related news well. Not only were there not many altcoins that stood out like in the past 2021 bull market, but there was no significant news in the altcoin market as the price of Bitcoin stagnated.
However, the decline in altcoin prices this week is worth noting in the context of the larger trend. This is because as the investment momentum in the cryptocurrency market disappears, not only the price but also the liquidity is falling. While Bitcoin fell about 3% during the week, Solana (SOL), which had been showing strong performance thanks to the memecoin craze, fell 9.63%. Avalanche, which showed a strong rise at the end of last year along with Solana, lost 18.96% in one week. World Coin, famous for OpenAI head Sam Altman's project, fell 14.85%.
Ethereum, which can be said to be the leader in altcoins, showed a solid performance last week, falling 2.51%. Of course, this is due to a surge in expectations that the U.S. Securities and Exchange Commission (SEC) may conclude that Ethereum is not a security as it concluded its investigation into Ethereum 2.0 last week.
What is the momentum that can reverse the current price trend of coins? Looking at the scheduled news, Ethereum, which is about to launch a spot ETF, has an advantage over Bitcoin in terms of recovering momentum. However, it is still unclear whether Ethereum can drive the price of the overall crypto market, including Bitcoin. ETF experts predict that the Ethereum spot ETF will be approved as early as July 2nd. I think it would be good to watch this part a little more closely.
On the 28th, personal consumption expenditures (PCE) were announced... Interest rate cut in September or November?
This Friday, the 28th, the US personal consumption expenditure (PCE) indicator for May will be announced. PCE is famous as a price index that the Federal Reserve uses in determining interest rates . Just looking at the Consumer Price Index (CPI) or PPI that was released earlier, prices themselves are expected to show a smooth downward trend, so the rate of increase is expected to generally decrease. However, it is necessary to consider whether the fact that prices are being controlled will necessarily have a positive effect on the prices of risky assets such as stocks and coins.
When interest rates are cut, liquidity supplied to the market increases, but in the past, when the United States lowered interest rates, the stock market often fell. The interest rate cut itself may act as a signal of economic contraction, leading to the sale of risky assets that had risen until then. Alternatively, a complex situation may arise where liquidity increased by interest rate cuts is concentrated into US artificial intelligence (AI) stocks such as NVIDIA, while Bitcoin is neglected.
The US Producer Price Index (PPI), which was announced on the 13th of this month, is a good example. Even though the indicators were significantly lower than expected, the price of Bitcoin fell again. At the same time, the S&P 500 index and AI stock prices rose. Of course, no matter what the outcome is, it is necessary to clearly know the expected timing of the big event of interest rate reduction. Should I do it in September? Should I do it in November? I think it would be good to approach the PCE presentation from that perspective.
Personally, I hope that the Bitcoin price will somehow surpass the $69,000 level by the end of June. If the current price remains the same, the Bitcoin price change in the second quarter of this year will be -6.06%. If that happens, I think it will lose a lot of momentum in terms of momentum investment compared to gold, bonds, and AI stocks that rose during the same period. Well, I hope our readers have successful investments this week as well.
