Bitcoin (BTC) is experiencing a significant shift in market behavior as it faces challenges in surpassing the $63,000 price level, diverging from the currently bullish U.S. equities.
In the beginning of H1 2024, the market was optimistic, leading to Bitcoin reaching an all-time high above $73,000. However, this enthusiasm waned by mid-year, with Bitcoin struggling in June due to various obstacles. As a result, BTC has declined by nearly 15% from its peak in March.
According to analysts at Bitfinex, prevailing policies have greatly reduced Bitcoin’s volatility and hindered its upward momentum. Data from Santiment shows a significant decrease in Bitcoin’s weekly volatility from 0.1306 in mid-March to a yearly low of 0.0198 in June.
Bitfinex analysts also noted that long-term holders, who had paused their selling activities in early May, have resumed offloading their holdings. This, along with an oversupply in the market, continues to weigh heavily on Bitcoin.
On-chain metrics indicate that long-term holders are once again taking profits, even at prices below the all-time high of around $69,000 reached in 2021. While miner sell-offs have decreased, suggesting some market stabilization, the high levels of profit realization by long-term holders paint a bearish near-term outlook for Bitcoin.
A major factor contributing to the oversupply is the potential selling by Mt. Gox depositors and the German government, both of which hold substantial amounts of Bitcoin. This reality has increased investor fear, uncertainty, and doubt (FUD).
In the broader macroeconomic environment, there are some signs that could potentially benefit risk assets like Bitcoin. The stability of the Personal Consumption Expenditures Index, which the Federal Reserve uses to assess inflation, in May raises optimism about a potential rate cut in September. Additionally, the latest estimate for U.S. GDP in the third quarter reveals underlying weaknesses, accompanied by a gradual drop in consumer confidence.
Despite these potentially favorable economic conditions, Bitcoin has not performed as expected. Instead, it has decoupled from U.S. equities, which have continued to rise. In June, Bitcoin dropped by over 8%, while the S&P 500 witnessed a 3.5% gain.
According to Bitfinex analysts, supply factors are not the only reason for this divergence. They point to speculative buying and news-induced sell-offs as contributing factors. Bitcoin is now more affected by negative news due to the decrease in interest across the spot market and recent negative net flows from investment products.
Although there is generally a positive outlook for Bitcoin in July, the asset is already down 0.18% this month due to a 0.35% drop this morning. At the time of writing, Bitcoin is trading at $62,675, erasing the mild gains it made on the first day of the month.