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What’s Behind the Decline in Bitcoin Price? Analysts Unveil 4 Factors, Share Their Predictions for a Rebound
Bitcoin’s price has been on a downward trajectory, sparking curiosity about the reasons behind this decline.
Author:
Mete Demiralp
18.06.2024 – 14:22
Update:
8 seconds ago
0
Bitcoin (BTC) has been facing challenges in maintaining its upward momentum since hitting $70,000 earlier in June.
Despite reaching this milestone just a couple of weeks ago, the price of Bitcoin has mostly been trending downwards or sideways, echoing levels seen three months ago. This nearly 7% decline is not attributed to a single significant event but rather a combination of factors.
One factor contributing to this stagnation, as per analysts, is the slowdown in 11 spot Bitcoin exchange-traded funds (ETFs). Interest in these ETFs surged in January following approval by the SEC. As per CoinGlass data, the total value of these ETFs now exceeds $53 billion. However, the majority of inflows occurred in the initial two months of operation.
Until March 13, there was an inflow of assets worth $55.3 billion into the funds, indicating a contraction since then. Just last week, net outflows amounted to $580.6 million.
Analysts also point to challenging mining conditions as another factor impeding Bitcoin’s growth. The surge in Bitcoin’s price was driven by anticipation of the halving on April 19, which reduced the supply of newly issued coins by 50% from 6.25 to 3,125 per block. Consequently, the hashrate, or total computing power used for Bitcoin mining, has been fluctuating. Following the halving in April, the hashrate dropped by 11% over the next four weeks, briefly recovered, and then declined again.
Matthew Sigel, director of digital assets research at VanEck, characterized this as a “typical” post-halving instability, with miners struggling to maintain profits as the cost per coin doubles.
Sigel anticipates that this consolidation phase may persist, but he also projects that Bitcoin’s price will see a significant increase during the US elections in November. He highlighted that the recent movement of Bitcoin is typical of a bull market, with corrections of up to 20% following an all-time high being common. Sigel added, “An 11% decline should not raise alarm bells.”
David Lawant, research manager at FalconX, suggested that the recent price drop could also be attributed to “relatively weak liquidity.” For instance, Bitcoin’s average daily trading volume in June dropped to less than half of what it was in March in both spot and futures markets. However, Lawant believes that the long-term downturn is linked to macroeconomic and political uncertainties.
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Bitcoin is hovering near the lower end of its range as market participants are still pondering where the next price catalyst will emerge from. Areas of uncertainty holding back investors include the trajectory of US monetary policy and the upcoming elections. The Fed foresees that interest rates will remain elevated for longer, conflicting with data suggesting that inflation may be moderating. Lawant mentioned that the market is attempting to navigate through this scenario.
*This is not financial advice.
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