Bitcoin has recently experienced a significant drop in price, reaching a new monthly low and falling towards the $61K level. This sudden decline has caused concern and raised questions among investors and traders. It is important to understand the reasons behind this plunge, as several factors have contributed to it, including miner activities, Federal Reserve policies, lack of new inflows, and market indicators. Let’s explore these key factors driving the downward trend.
One of the key factors behind Bitcoin’s decline is the selling pressure from miners. There has been a noticeable increase in selling from older wallets, mainly held by miners. This trend follows the recent Bitcoin halving event, which reduced daily production from 900 to 450 Bitcoins. QCP Capital, in a recent market analysis, highlighted that Bitcoin miners are facing significant selling pressure due to increased break-even prices after the halving. Miner holdings of Bitcoin have reached their lowest point in 14 years, with total reserves declining by 50,000 since the beginning of the year. Miners have sold over 30,000 BTC, worth approximately $2 billion, primarily on exchanges, which has directly contributed to the price drop.
Another factor influencing Bitcoin’s price drop is the Federal Reserve’s recent liquidity reversal. Historically, Bitcoin’s price has shown a strong correlation with the Federal Reserve’s liquidity conditions. When the Federal Reserve injects liquidity into the market, Bitcoin tends to benefit from increased capital flow. Conversely, when liquidity is withdrawn, it often has a negative impact on Bitcoin’s price. In the past two weeks, the Federal Reserve’s liquidity has turned negative, directly affecting Bitcoin’s price as less liquidity means less capital available for investment in cryptocurrencies.
Bitcoin also experienced a drop in inflows from ETFs (Exchange-Traded Funds). U.S.-listed spot Bitcoin ETFs reported outflows for the fifth consecutive day, totaling over $900 million for the week. This lack of new inflows into the market adds selling pressure on Bitcoin. Additionally, the Inter-Exchange Flow Pulse (IFP) indicator, which measures the flow of Bitcoin from spot exchanges to derivative exchanges, has been declining. A declining IFP indicates that more Bitcoin is being sent to spot exchanges, which is typically a bearish signal.
It is interesting to note that Bitcoin has historically shown a tendency to bottom out in June. Since 2020, Bitcoin has found a bottom in June, and some analysts believe this pattern could repeat itself. However, it is important to consider that Bitcoin has always rebounded following the bottom, and this time might be no different.
As for the future of Bitcoin’s price, the current bearish momentum has caused the price to break below several Fib levels and decline from $61K. Currently, Bitcoin is trading at $60,800, experiencing a decline of over 5.2% in the last 24 hours. In order for bulls to regain control, they must push the price above the moving averages, which could potentially send the BTC/USDT pair towards $63K and then $64,500. However, there is strong resistance anticipated around the $65K-$66K range. On the other hand, if the price fails to maintain above current levels or the moving averages, it would signal continued negative sentiment, potentially triggering a deeper correction below $60,000.
In conclusion, Bitcoin’s recent price drop can be attributed to several factors, including selling pressure from miners, the Federal Reserve’s liquidity reversal, lack of new inflows from ETFs, and declining indicators. Understanding these factors is crucial for anyone involved in the market and can provide valuable insights into the future of Bitcoin’s price.