Author: Bitkoala Finance
The Nasdaq Composite surged to a seventh straight record high, while the Dow Jones Industrial Average and S&P 500 hit similar highs, helped by chipmaker Nvidia and investor enthusiasm for artificial intelligence.
However, Bitcoin has failed to keep up.
Although market observers predict that cryptocurrencies could soar to $200,000 in the next year, their prices have remained stable at around $65,000 over the past week. Why is the crypto market showing a retrograde trend? Bitkoala believes that there are four factors:
The market needs to digest the impact of Bitcoin halving
Adam Morgan McCarthy, an analyst at crypto data and analytics firm Kaiko Research, said Bitcoin is now 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%. It's not just that Bitcoin tends to be more volatile - they're just "affected by different factors."
Bitcoin has had a very strong start to the year, thanks to regulatory developments in the U.S. The next driver for Bitcoin will be the latest halving and the long-term impact of ETF demand. The fourth halving took place in mid-April and cut the number of Bitcoins miners receive for maintaining the blockchain in half.
Market participants expect the supply shock to push up the price of bitcoin as fewer bitcoins are produced. The effects of the halving "usually take a few months to be felt" — and will be largely felt once demand for bitcoin picks up. With more advisors and firms bringing in new investors in the coming months, demand for ETFs in the U.S. could have a significant impact.
Jacob Joseph, a research analyst at CCData, agreed that a few months of subdued trading following the quadrennial halving event is normal. Especially given the overheated market in the months leading up to the halving. Trading volumes on centralized exchanges hit an all-time high in March, and open interest suggests that speculative activity has “reached unprecedented levels.” In this sense, the market needs the current cooling-off period or price consolidation before we see the rapid price expansion typical of Bitcoin and other digital assets.
ETF outflows
Last week was the worst period of outflows from spot Bitcoin exchange-traded funds since March, with outflows reaching $620 million. Short-term outflows from spot Bitcoin ETFs have also exacerbated negative market sentiment and had an adverse impact on the asset’s price action.
However, the upcoming launch of an Ethereum ETF, coupled with recent positive macroeconomic data, suggests that Bitcoin and major crypto assets may soon reverse their trend and aim for new cycle highs.
Mt.Gox repays creditors with BTC
Mt. Gox was once the world's largest cryptocurrency exchange, but its influence has loomed over the industry since its 2014 hack and collapse. The reason? About $9.2 billion worth of Bitcoin was seized during bankruptcy proceedings, awaiting repayment to creditors. Now it seems that the 142,000 Bitcoins could flood the market at any time before October 31, the final repayment deadline for Mt. Gox, and the market may just be waiting for these redemptions to occur.
David Duong, head of research at cryptocurrency exchange Coinbase, recently said: “Massive bitcoin redemption events are unlikely. But concerns about these repayments could still limit liquidity as market participants may avoid deploying new capital amid uncertainty.”
Miners sell holdings
Bitcoin miners also put pressure on the price of the top cryptocurrency.
While the halving limits the amount of new Bitcoins that mining companies can create and sell, most mining companies still have large reserves of Bitcoin.
According to analysis firm CryptoQuant, miners have sold about $300 million of their Bitcoin reserves since the beginning of the year, and Marathon Digital, the largest publicly traded mining company in the United States, sold more than $92 million of Bitcoin in June alone, about 8% of its $1 billion reserves.
It should be noted that as an emerging asset, Bitcoin's price fluctuations may be more drastic than other assets. At the end of an over-growth market, there may be profit taking and an end to oversell, and then it may consolidate at a low level for a period of time, waiting for the start of the next cycle.
