Bitcoin Shows Strong Divergence from Equities as BTC Price Drops Under $60,000

As a researcher with experience in financial markets and cryptocurrencies, I find the recent price action in both the S&P 500 and Bitcoin intriguing. While the equities market continues to make new all-time highs, Bitcoin has been experiencing selling pressure, slipping under its crucial support level of $60,000.

As the S&P 500 sets new record highs daily, Bitcoin is experiencing a setback. In just the last 24 hours, Bitcoin’s price dropped by 4.56%, dipping below its crucial support level of $60,000. Currently, Bitcoin is priced at $59,892 with a market capitalization of $1.181 trillion. For the past few weeks, Bitcoin has displayed limited movement and significant contrast to the surging equities market.

As a crypto investor, I’ve been closely monitoring the latest developments in the macroeconomic landscape. Recently, Federal Reserve Chairman Jerome Powell shared some insightful remarks regarding inflation. He acknowledged that the central bank has made significant strides in this area, but cautioned that we’re not out of the woods yet. In his own words, “We’ve made quite a bit of progress on inflation, but there is still more work to be done.”

As a researcher studying economic trends, I would express my desire for greater certainty that inflation is consistently trending towards the 2% mark before considering any adjustments to monetary policy.

Powell’s comments came at a central banking forum in Sintra, Portugal.

The Fed’s accommodating attitude seems to have boosted equity markets, as indicated by a rise in futures after this week’s inflation report was released. The Dow Jones Industrial Average futures climbed by 0.073%, while S&P 500 futures gained a modest 0.018% during early trading.

On Tuesday’s market close, the S&P 500 reached a new all-time high of 5,509.01, marking a 0.6% increase. The Dow Jones Industrial Average also saw a gain of 0.4%, ending the day at 39,331.85. Meanwhile, the Nasdaq composite experienced a 0.8% rise, surpassing its previous record to settle at 18,028.76.

The Personal Consumption Expenditures Price Index, which is the Federal Reserve’s preferred measure of inflation, rose by 2.6% year-over-year through May. This represents a noticeable drop from approximately 4% seen in the previous year. Nevertheless, experts predict that it may take until 2026 for this index to reach the Fed’s target of 2%.

Bitcoin Miners to Sell More BTC

According to a report by Kaiko Research, the price of Bitcoin may encounter persistent selling from miners due to decreased fees for transactions on the network and lowered rewards for mining the cryptocurrency.

Based on Kaiko’s findings, the typical fee for transactions has decreased significantly, ranging between $3 and $5, which is a marked drop from the around $45 fees observed in January. In the month of April, there was a code modification called the halving that brought about a reduction in rewards for processing transactions, changing them from 6.25 Bitcoins to 3.125 Bitcoins.

The decrease in this reduction puts pressure on miners, lowering their income and making the mining process less lucrative. Meanwhile, costs like energy, labor, and rent have remained fairly stable. Furthermore, the reduced network fees have added to the revenue loss.

As a crypto investor, I’ve noticed that in May, leading Bitcoin miners like Marathon Digital offloaded 390 Bitcoins from their holdings and have indicated they intend to sell more to cover operating expenses. According to Kaiko, this trend raises concerns about potential forced selling by miners in the upcoming months, increasing the supply of Bitcoin on the market and potentially impacting its price negatively.

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2024-07-03 17:54