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Bitcoin Faces New Monthly Low, Dipping Below $62.5K

Bitcoin’s value has recently plummeted, falling below $62,500 and setting a new monthly low. This decline is influenced by various factors shaping market dynamics and affecting investor sentiment. As traders and investors grapple with these changes, it’s important to understand the underlying causes driving this downturn in the cryptocurrency’s value.

Key Drivers Behind the Recent Bitcoin Sell-Off

Increased Miner Selling
Starting this month, miners have offloaded over 30,000 BTC, valued at approximately $2 billion. This significant amount of selling on exchanges is a primary driver of the current price decline.

Source: The Block

Federal Reserve’s Liquidity Reversal

Bitcoin’s price is closely tied to the liquidity provided by the Federal Reserve, which has recently become negative. This shift over the past two weeks adversely affects Bitcoin’s market price.

Outflows from Bitcoin ETFs

There has been a consistent withdrawal from Bitcoin ETFs, exacerbating the selling pressure on the market. These outflows suggest a broader reluctance among investors to commit to Bitcoin at its current levels.

Decline in Inter-Exchange Flow Pulse (IFP)

The IFP, an indicator tracking Bitcoin’s movement from spot to derivative exchanges, is declining. A drop in this metric typically signals increased selling pressure as more BTC is moved to spot exchanges.

Seasonal Slowdowns and Historical Patterns

The “Summer Lull” contributes to Bitcoin’s slump. The cryptocurrency market often experiences reduced activity during the summer months. Trading volumes during the third quarter are historically lower, sometimes dropping by more than 40% compared to peak periods.

According to crypto analyst Miles Deutscher, this seasonal trend has been evident in past years. For instance, during the summer of 2020, the market saw a phase dubbed “DeFi Summer,” characterized by cautious investor behavior. In 2021, market sentiment remained bearish until a significant tweet from Elon Musk in July sparked a rally. The following year, the market faced a steep decline, and in 2023, it mostly moved sideways.

Typically, trading activities by funds and individual traders lessen in July and August. This reduced activity often results in clearer market directions from a macroeconomic perspective. However, optimism generally returns later in the year, leading to improved market performance in the fourth quarter.

Bitcoin Dips to $61K Amid Surge in Trading Volume
At the time of writing, Bitcoin was priced at $61,375, experiencing a 4.5% decline over the past day. The chart shows a downtrend in Bitcoin’s price, which started close to $64,270 and has fallen to its current level. Market capitalization has also decreased by 4.88%, now at approximately $1.205 trillion. Trading volume has surged by 215% despite the price drop in the past 24 hours. This volume spike might suggest increased selling pressure or volatility in the market.

 

Bitcoin Dips to $61K
Source: CoinMarketCap

Prospects for a Bitcoin Recovery After Summer Lull

Despite these challenges, historical patterns suggest a potential rebound. Bitcoin has consistently reached its lowest value points in June since 2020, with a possibility of making a bottom again this year. Bitcoin could see a rebound from the $59K-$60K range if the pattern holds.

As the market navigates through these cyclical and seasonal challenges, the year’s later months might bring renewed vigor to Bitcoin’s trading volumes and values. If historical trends continue, improved market performance could be expected as the year progresses into its final quarter.

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