Author: E. Johansson Source: DLNews Translation: Shan Ouba, Jinse Finance
The Nasdaq Composite Index has been on a tear, hitting seven straight all-time highs. The Dow Jones Industrial Average and S&P 500 have hit similar highs, thanks to chipmaker Nvidia and the investment frenzy around artificial intelligence. Bitcoin, however, has failed to keep up.
Although market observers predict that the cryptocurrency could soar to $200,000 in the next year, it has remained stable around $65,000 over the past week.
Here are four factors holding back the top cryptocurrency.
Digestion halved
Bitcoin is currently just taking a breather after a strong start to the year . The Nasdaq may be up 18% so far this year, but Bitcoin is up 53% , McCarthy noted. This isn’t just because Bitcoin tends to be more volatile — they just “move on different factors.”
Bitcoin has had a very strong start to the year, helped by regulatory developments in the U.S., and the next drivers for Bitcoin will be the latest halving and the long-term impact of ETF demand.
The fourth halving, which took place in mid-April this year, halved the number of bitcoins miners receive for maintaining the blockchain. Market participants expect the supply shock to drive prices higher as the creation of bitcoins decreases. But the effects of halvings usually take several months to show up, and are mostly visible when demand for bitcoin rises.
U.S. ETF demand could have a significant impact here as more advisors and firms onboard new investors in the coming months.
CCData research analyst Jacob Joseph agreed, saying that quadrennial events are usually followed by a few months of quiet trading. This is especially true because the market was overheated in the months leading up to the halving.
The central exchange recorded new all-time highs in March, while speculation indicated by open interest "reached unprecedented levels. Open interest is an indicator that reflects the total number of open futures contracts. High open interest is often due to a speculative frenzy.
In this sense, the market needed the current cool-down period or price consolidation before seeing the rapid price expansion typical of Bitcoin and other digital assets.
ETF outflows
Last week was the worst week for outflows from spot Bitcoin exchange-traded funds (ETFs) since March, with a total outflow of $620 million. Short-term outflows from spot Bitcoin ETFs also contributed to negative market sentiment and affected the price trend of the asset.
However, the upcoming launch of an Ethereum ETF, coupled with recent positive macroeconomic data, suggests that Bitcoin and major crypto assets are likely to reverse their trend soon and aim for new cycle highs.
Mt. Gox
Once the world's largest cryptocurrency exchange, Mt. Gox has been a looming threat over the industry since its collapse following a hack in 2014. The reason? About $9.2 billion in Bitcoin was seized in bankruptcy, awaiting repayment to creditors.
It now appears that the 142,000 bitcoins could flood the market any time before October 31, the final repayment deadline for Mt. Gox, and the market may simply be waiting for these redemption events to occur.
“A massive bitcoin redemption event is unlikely,” David Duong, head of research at cryptocurrency exchange Coinbase, recently told DL News. “But concerns surrounding these repayments could still limit liquidity as market participants may avoid deploying new capital amid uncertainty.”
Miners sell their positions
Bitcoin miners are also putting pressure on the price of the top cryptocurrency.
Although the halving limits the number of new bitcoins that mining companies can create and sell, most of these companies still hold large reserves of bitcoin. According to data from the analysis firm CryptoQuant, the industry has sold about $300 million in bitcoin reserves since the beginning of the year. Marathon Digital, the largest publicly traded miner in the United States, sold more than $92 million in June alone - about 8% of its billion-dollar reserves.
