Bitcoin’s Price Movement Unaffected by US Stock Market Trends due to Supply Challenges

Bitcoin (BTC) is currently experiencing a notable shift in market dynamics, diverging from the positive trend seen in U.S. equities as it grapples with challenges to surpass the $63,000 price threshold.

At the onset of H1 2024, the market exhibited optimism, propelling Bitcoin to achieve an all-time high exceeding $73,000. However, this bullish sentiment waned as the year progressed, with Bitcoin encountering difficulties in June, leading to a decline of nearly 15% from its peak in March.

Analysts at Bitfinex have observed that prevailing market conditions have played a significant role in reducing Bitcoin’s volatility and impeding its upward trajectory. Data from Santiment reveals a sharp decrease in Bitcoin’s weekly volatility from 0.1306 in mid-March to a low of 0.0198 in June.

One of the key factors contributing to the current market pressure on Bitcoin is the resumption of selling activities by long-term holders, who had paused their sales earlier in May. This renewed selling activity, combined with an excess supply, continues to exert downward pressure on the cryptocurrency.

On-chain data suggests that long-term holders are once again capitalizing on profits, even at price levels below the all-time high reached in 2021. While there has been a reduction in miner sell-offs, indicating some stabilization, the significant profit-taking by long-term holders paints a bearish near-term outlook for Bitcoin.

The looming potential selling pressure from Mt. Gox depositors and the German government, both holding substantial Bitcoin reserves, has further fueled investor apprehension, contributing to fear, uncertainty, and doubt in the market.

Despite some positive macroeconomic indicators that could favor risk assets like Bitcoin, such as stable Personal Consumption Expenditures Index and the possibility of a rate cut in September, Bitcoin has not capitalized on these developments as anticipated. Instead, Bitcoin has decoupled from the upward trajectory of U.S. equities, with Bitcoin experiencing an over 8% drop in June while the SPX index recorded a 3.5% gain.

Bitfinex analysts point out that supply-related factors are not the sole drivers of this divergence, highlighting speculative trading and news-driven sell-offs as additional contributors. With waning interest in the spot market and negative net flows from investment products, Bitcoin is more susceptible to adverse news impacts.

Despite a positive outlook for Bitcoin in July, the cryptocurrency has already faced a 0.18% decline this month, following a 0.35% drop earlier today. Bitcoin is currently trading at $62,675, having erased the modest gains made at the beginning of the month.