As a long-term Bitcoin investor with some experience in the market, I’ve seen my fair share of price swings and market events. However, the recent decoupling between Bitcoin and US equities, particularly the Nasdaq 100 index, has left me feeling uneasy about the short term outlook for BTC prices.
Over the past few months, the connection between soaring American stock markets and Bitcoin (BTC) has started to weaken. The digital currency is currently grappling with an oversupply issue and decreased demand, resulting in a significant price decline of over 20% from its June peak at around $70,000 for the most prominent cryptocurrency.
Bitcoin Correlation With Nasdaq 100
Based on Bloomberg’s report, the connection between Bitcoin and the Nasdaq 100 index, as measured by their 90-day correlation coefficient, reached a low of 0.21 on Tuesday. This is the weakest correlation between the two since early May. Over the past two months, this correlation has decreased by more than half.
As a market analyst, I can tell you that the recent decoupling of Bitcoin from traditional markets is believed to be driven by some unique supply factors. Specifically, Joshua Lim, the co-founder of Arbelos Markets, points out that Bitcoin has been dealing with the repercussions of government sales of seized BTC. Over the past month, both the German and US governments have offloaded significant amounts of Bitcoin. Additionally, funds from the defunct Bitcoin exchange Mt. Gox have been distributed, which could be contributing to the price movements in the cryptocurrency market.
According to NewsBTC’s report, the downward trend of Bitcoin since its peak at $73,700 in March has been expedited due to the ongoing process led by Mt. Gox’s administrators for returning around $9 billion worth of tokens to their respective creditors.
As a crypto investor, I’ve noticed that German authorities sold over half of the 50,000 Bitcoin they confiscated from a pirate site back in January. This sale has contributed to the persistent selling pressure we witnessed in the market last month.
Manuel Villegas, a research analyst at Julius Baer, has identified the upcoming surplus in supply as the major influence undermining investor trust.
As a researcher studying the cryptocurrency market, I’ve observed that a significant amount of tokens are anticipated to reach centralized exchanges in the coming days. This influx could potentially put downward pressure on prices due to the oversupply situation. The looming supply surplus has been a major concern for investors, undermining their confidence in the market.
Miner Capitulation And Falling Profits
Bitcoins prices are influenced by more than just these factors, and Bitcoin miners experience pressure to offload their tokens because of dwindling profitability.
Miners, who play a crucial role in maintaining the Bitcoin network by processing transactions, are currently grappling with the monetary consequences following the halving that occurred in April. This event decreased the reward they obtain from mining new coins.
Some miners choose to sell a portion of their Bitcoin stockpile to cover their fiat expenses related to mining operations. According to crypto analytics firm CryptoQuant, this selling behavior among miners matches the levels seen in December 2022, with a 7.7% decrease in hashrate – akin to the aftermath of the FTX collapse.
As a researcher, I’ve come across estimations from Bloomberg suggesting an average all-in cost of production for miners amounts to around $54,500. When cryptocurrency prices drop significantly below this figure, mining operations might be compelled to sell some of their token reserves in order to meet operational expenses.
In the end, the surplus of coins held by seizures, the dispersal of Bitcoins from Mt. Gox, and miners’ aggressive sales have added to the investor anxiety, making it more challenging for Bitcoin’s price to rebound.
Currently, Bitcoin (BTC) has regained the $57,850 mark and experienced a rise of approximately 2% within the last 24 hours.
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2024-07-10 10:17