Over the past three months, Bitcoin’s price has remained relatively unchanged, consistently trading down or sideways after briefly reaching the $70,000 mark two weeks ago. This 7% decline appears to stem from multiple factors.
One significant cause is the stagnation in the performance of the 11 spot Bitcoin exchange-traded funds (ETFs), which saw a surge in interest following their approval by the SEC in January. Initially, these ETFs quickly accumulated over $53 billion in assets, but after peaking at $55.3 billion in early March, they have experienced a contraction, with $580.6 million in net outflows recorded last week alone.
Complicating Bitcoin’s trajectory are the increasingly challenging mining conditions. The excitement leading up to the April 19 halving, which reduced the supply of new coins entering the market by half—from 6.25 to 3.125 coins per block—initially boosted Bitcoin’s value. However, this has also led to volatility in the hashrate, or the total computational power used for mining Bitcoin, which dipped by 11% in the four weeks following the halving and has since struggled to recover.
Matthew Sigel, head of digital assets research at VanEck, views these fluctuations as typical post-halving instability. He anticipates that while the market may continue to consolidate in the short term, Bitcoin’s value is likely to rise significantly by the U.S. elections in November. Sigel points out that a drawdown of 11% is not unusual in a bull market and is no cause for concern.
David Lawant, head of research at FalconX, attributes the recent dip in Bitcoin’s price to weak liquidity, noting that Bitcoin’s average daily trading volume in June was less than half of what it was in March, affecting both spot and futures markets. The longer-term market stagnation is influenced by macroeconomic and political uncertainties, including U.S. monetary policy directions and the upcoming election.
Amid these uncertainties, market watchers are closely monitoring potential catalysts for Bitcoin’s next major price movement. The path of U.S. monetary policy remains ambiguous, especially as the Federal Reserve indicates that interest rates will remain high, potentially conflicting with signs of cooling inflation.
The upcoming U.S. election also adds to the uncertainty, with political figures positioning themselves as proponents of cryptocurrency. Former President Donald Trump, for instance, has positioned himself as a “crypto president,” pledging to oppose any governmental actions against cryptocurrencies. This stance could influence market sentiments, particularly as the electoral contest remains tightly contested.
Overall, despite recent challenges, Bitcoin has achieved substantial growth over the past year, appreciating more than 150% as it navigates through economic, political, and regulatory landscapes.
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