Understanding the Key Factors Behind Bitcoin\'s Recent Price Drop

Bitcoin recently experienced a significant price drop, falling toward the $61K level and hitting a new monthly low. This sudden decline has raised concerns

Bitcoin experienced a significant price drop recently, hitting a new monthly low and raising concerns among investors. Several factors have contributed to this decline, including miner activities, Federal Reserve policies, lack of new inflows, and market indicators. Let’s explore the key drivers behind this downturn.

Bitcoin miners faced increasing selling pressure after the halving, according to QCP Capital’s recent market analysis. As break-even prices rose, miners sold substantial amounts of BTC.

This selling activity was evident on exchanges, where the majority of the mined BTC was sold. As a result, miner holdings dropped to their lowest in 14 years, with total reserves decreasing by 50,000 since the year began.

Furthermore, to meet financial requirements amid economic pressures, the German government transferred $600 million worth of Bitcoin to exchanges, selling $200 million in a single day. With holdings of approximately $3 billion in Bitcoin, this sell-off was uncommon and attracted attention.

Another crucial factor influencing Bitcoin’s price drop was the Federal Reserve’s recent liquidity reversal. Historically, Bitcoin’s price showed a strong correlation with the Federal Reserve’s liquidity conditions.

When the Federal Reserve pumped liquidity into the market, Bitcoin tended to benefit from the increased capital flow. Conversely, when liquidity was withdrawn, it often negatively impacted Bitcoin’s price.

In the past two weeks, the Federal Reserve’s liquidity turned negative. This shift had a direct impact on Bitcoin’s price, as less liquidity in the market meant less capital available for investment in risk assets like cryptocurrencies.

Bitcoin experienced a drop in ETF inflows, with U.S.-listed spot bitcoin (BTC) ETFs reporting their fifth straight day of outflows on Thursday, totaling over $900 million for the week. Grayscale’s GBTC and Fidelity’s FBTC led with significant outflows of $53 million and $51 million, respectively.

Only BlackRock’s IBIT saw modest inflows of $1 million, while other ETFs showed minimal net activity. Total trading volumes reached $1.1 billion, according to SoSoValue data.

A significant issue contributing to the recent Bitcoin price drop is the lack of new inflows into the market. Bitcoin ETFs (Exchange-Traded Funds), which are financial products that track the price of Bitcoin, have been experiencing consistent outflows over the past week. This trend indicates that investors are withdrawing their funds from these ETFs, adding more selling pressure on Bitcoin.

Additionally, the Inter-Exchange Flow Pulse (IFP) indicator, which measures the flow of Bitcoin from spot exchanges to derivative exchanges, has been falling. A declining IFP indicates that more Bitcoin is being sent to spot exchanges, which is typically a bearish signal.

Interestingly, Bitcoin has shown a tendency to make a bottom in June over the past few years. Since 2020, Bitcoin has found a bottom in June, and some analysts believe this pattern could repeat itself.

However, Bitcoin has always rebounded following the bottom. This time, we might see a similar trend.

Bitcoin dipped below the $64,500 support, leading to a strong bearish momentum in the price chart. As a result, the price broke below several Fib levels and declined from $61K in recent hours. Currently, BTC price is trading at $60,800, declining over 5.2% in the last 24 hours.

For bulls to regain control, they must push the price above the moving averages. This could send the BTC/USDT pair towards $63K and then $64,500, though strong resistance is anticipated around $65K-$66K.

Conversely, a failure to maintain above current levels or the moving averages would signal continued negative sentiment, potentially triggering a deeper correction below $60,000.

On the 4-hour chart, bulls are attempting a recovery, meeting resistance at the 20-EMA. However, sellers are strongly defending the price as they aim for an immediate correction below the $60K mark as selling pressure rises.

News source：https://www.kdj.com/cryptocurrencies-news/articles/understanding-key-factors-bitcoin-price-drop.html

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