Crypto Market Today: Bearish Trend Prevails, But...
Over the past two months, the cryptocurrency market has faced significant bearish pressure. Although there is a prevailing pessimism among traders, current conditions present more favorable buying opportunities than have been seen during any recent downturns.
The market is witnessing a complex interplay of several opposing trends, each potentially harboring surprises for both bulls and bears.
Bearish Factors:
- Germany's rapid sale of confiscated BTC. Over half of the 50,000 coins, previously seized from the operator of the illegal website movie2k.to, involved in the unauthorized distribution of copyrighted media content from 2008 to 2013, have already been transferred to cryptocurrency exchanges. Although there will always be buyers for bitcoins, this influx has inevitably exerted a psychological impact on the market. It’s important to note that this is a standard procedure in Germany regarding confiscated assets in criminal proceedings, which must be sold within a specific timeframe to pay for compensations, debts to the budget, etc.
- Uncertainty surrounding the assets of the defunct Mt.Gox exchange. The anticipation that creditors will begin actively selling off their received cryptocurrencies is casting a shadow over the market. It is crucial to recognize that the amount of BTC involved here far exceeds what the German government could release (refer to point 1).
- Potential massive BTC sale by the U.S. government. This possibility could exacerbate the market's condition, considering the substantial Bitcoin reserves held by the U.S. As of May 1, 2024, U.S. law enforcement agencies held around 210,000 coins. Pessimistic investors are highlighting the financial strains faced by the American government due to obligatory payments on national debt. However, optimists recall that the government faced similar challenges last year but managed its resources prudently, avoiding the release of a significant volume of assets all at once.
Bullish Factors:
- Investors continue to actively invest in Bitcoin ETFs. Trillions of institutional dollars could potentially be directed towards Bitcoin, as many investors have been awaiting a discount. According to ETF trackers, these funds are currently experiencing an average daily inflow of over $1 billion.
- The expected launch of Ethereum ETFs in July could significantly boost demand for this cryptocurrency and, by extension, enhance the liquidity of the entire crypto market.
- The U.S. Federal Reserve is potentially gearing up to lower interest rates, with Citi Research analysts anticipating such a move by September. Traditionally, lower interest rates decrease the cost of money for investors, thereby increasing investments in higher-risk assets like cryptocurrencies.
Ambiguous Factors:
- The possible return of Donald Trump to the White House. The American crypto community believes that Trump would strongly support the digital industry and virtual asset markets if he were President again, given his recent enthusiasm for cryptocurrencies. However, it’s important to remember that campaign promises are not always kept.
- In June, Bitcoin significantly underperformed compared to the NASDAQ index. Given the historically observed correlation between these assets, this could suggest the potential for future growth of BTC. But is this correlation guaranteed to persist and will it hold this time? Moreover, the correlation could potentially reverse, not with crypto catching up to NASDAQ, but with the stock market possibly starting to decline, adding further uncertainty.
BTC and NASDAQ Correlation. Source: theblock
With three arguments each for and against, plus two wild cards that could tip the scales in either direction, an exciting and eventful year awaits in the cryptocurrency market. This situation presents a formidable challenge for investors, either to justify their dreams of the coveted yellow Lambo or to spend another year analyzing mistakes made.
