Bitcoin
Bitcoin diverges from US stocks amid supply issues
Bitcoin (BTC) has undergone a significant shift in market behavior, diverging from the currently bullish U.S. stocks as it faces challenges in its attempt to break above the $63,000 price level.
According to a Bitfinex report shared with crypto.news, H1 2024 started with optimism for the market, leading to an all-time high for Bitcoin above $73,000. However, this enthusiasm faded mid-year, with Bitcoin struggling in June due to several headwinds. BTC is now down nearly 15% from its March peak.
According to analysts at Bitfinex, prevailing policies have significantly dampened Bitcoin’s volatility and hindered its upward momentum. Data from Santiment indicates a drastic drop in Bitcoin’s weekly volatility from 0.1306 in mid-March to a yearly low of 0.0198 in June.
BTC Price and Volatility – July 2 | Source: Santiment
Bitfinex analysts highlighted that long-term holders, who had paused their sales activities In early May, they resumed selling their assets. This resumption of sales, together with an excess of supply, continues to weigh heavily on the market.
On-chain metrics indicate that long-term holders are taking profits again, even at prices below the 2021 ATH of around $69,000. While miner liquidations have subsided, suggesting some market stabilization, the high levels of profit-taking by long-term holders make the short-term outlook for Bitcoin bearish.
One of the main factors contributing to oversupply is the potential for sale by Mt. Gox Depositors and the German government. Both entities have substantial holdings in Bitcoin and could choose to liquidate their holdings. This reality has further increased investor FUD (fear, uncertainty, and doubt).
In the broader macroeconomic environment, some signals could potentially benefit risk assets like Bitcoin, according to the report. The Personal Consumption Expenditures Index, which the Fed uses as a benchmark to gauge inflation, remained stable in May. Analysts added that this stability increases optimism about a potential rate cut in September.
Supporting this outlook, the latest third-quarter estimate for U.S. GDP reveals underlying weaknesses. This comes amid a gradual decline in consumer confidence.
Despite these potentially favorable economic conditions, Bitcoin did not benefit as expected. Instead, BTC decoupled from US stocks, which continued their upward trajectory. In June, Bitcoin fell by over 8%, while the SPX witnessed a 3.5% gain.
According to Bitfinex analysts, supply factors are not the only culprits behind this divergence. They point to speculative buying and news-induced liquidations. BTC is now more impacted by negative news due to the drop in interest in the spot market and recent negative net flows from investment products.
Despite a generally positive outlook For BTC in July, the asset is already down 0.18% this month following a 0.35% drop this morning. Bitcoin is trading at $62,675 at the time of writing, having erased the slight gains it made on the first day of the month.