Thank you, next?: Possible explanations regarding the recent rise to the $63K level:
US Election
During the 2024 US presidential debate on June 27, Biden had moments of stammering and appeared lost. In contrast, Trump appeared confident and strong. Biden's camp later revealed that he had a cold during the debate, possibly using this as an excuse to explain his weak performance, which raised concerns about his health. Following the debate, Bitcoin peaked at $63K, which many interpreted as a bullish sign.
This was seen as an indication of Trump's perceived victory in the debate, increasing his chances of winning the election. Since Trump is considered a more crypto-friendly candidate, many believed the crypto market would thrive under his presidency. However, some analysts viewed this rise as a temporary event. They suggested that during periods of extremely low trading volume, a well-timed weekend pump caused waves of liquidations as existing short positions' stop-loss orders were triggered.
Bitcoin Miners Covering Their Operational Costs
Declining Bitcoin Hashrate
During the North American summer months, it is common for some Bitcoin miners to curtail their operations, leading to a potential fall in Bitcoin hashrate and difficulty. Currently, the hashrate has declined from 650 million TH/s (terahashes per second) to 550 million TH/s.
Declining Miners Revenue
Despite a rebound in miner revenue from $30 million per day in May to $39 million in June, the latest figures show a drop to just $27 million. This indicates that miners may need to liquidate more BTC inventory to fund their operations. Miner revenue is now at the same level as when Bitcoin was trading at $30,000.
Flat Stablecoin minting
Since the Bitcoin halving in April, stablecoin minting has flatlined, explaining Bitcoin's struggle over the last few months. This stagnation, along with other data points, has stopped the flow of new liquidity into the market.
On-chain Anaylsis
Bitcoin dormancy flow has increased over the past three months. This metric, useful for determining market cycles and assessing whether Bitcoin is bullish or bearish, gauges the number of coins being spent relative to the overall trend. Data from Glassnode reveals that the Bitcoin dormancy z-score has sharply risen over the last 90 days.
One crypto market analyst noted that this metric peaked significantly in April, indicating that the average age of coins spent is much higher in 2024. "Peaks in this metric (z-score) typically see cycle tops just three months later," the analyst explained.
Another analyst pointed out that dormancy flow (current market cap vs. annualized dormancy) has peaked as old wallets wake up. Spikes in this metric predicted the peaks in 2017 and 2021 within months. Disciplined long-term investors are selling while shorter-term traders are buying. Some of these on-chain data points spiked due to Mt. Gox, which may distribute $9 billion in Bitcoins this month.
Macro Economy
Some analysts believe that the US ISM Manufacturing Index, a leading indicator for the US economy, reached a cyclical high in April. Recently, it fell to 48.8, the weakest level since the pandemic, accompanied by deteriorating job claims. These indicators suggest that inflation pressures are easing, leading markets in traditional finance to react positively and anticipate the Fed's first rate cut in September.
On the other hand, 10x Research, a rising crypto research firm, notes, "Previously, highs and lows in this momentum indicator have been high-risk reward periods for buying and selling Bitcoin. However, the timing can be several months off. If April was the peak for the ISM momentum YoY, then the peak for the Bitcoin cycle might be close. In an ideal scenario, the FOMC would indicate its willingness to start its interest rate-cutting cycle during the July 31 meeting and press conference. Fed Chair Powell could reiterate this view during the Jackson Hole symposium on August 23 before the Fed could cut rates on September 18. Alternatively, the Fed could cut on December 18. However, we lean toward the view that the Fed might cut once this year, either in September or December, or not at all."
Reference:
- https://mail.10xresearch.co/p/bitcoin-nears-60000-key-factors-behind-drop
- https://www.coindesk.com/business/2024/06/18/bitcoin-hashrate-may-finally-slow-as-miners-face-scorching-summer-heatwaves/
- https://www.tradingview.com/news/cointelegraph:4c3d6ff6c094b:0-3-reasons-why-bitcoin-analysts-think-a-btc-price-cycle-top-is-in/