Eight major reasons caused BTC to drop below $60k. How will the market move next?

Tao Zhu, Jinse Finance

Summary: The recent market outlook remains unfavorable, with the total cryptocurrency market capitalization hovering below $2 trillion, down 20% in the past month; BTC has fallen below the $60k threshold, down over 20% in the past month. What factors are driving this market decline? What is the outlook for the future market?

1. Overview of Crypto Market Trends

According to Tradingview data, as of press time, the total market cap of the crypto market is $2.02 trillion, down 6.88% in the past week; down 19.84% in the past month; down 29.97% in the past six months; and down 30.33% in the past year.

BTC price stands at $59,346.65, down 5.66% in the past week; down 21.75% in the past month; down 32.41% in the past six months; and down 32.22% in the past year.

Other major cryptocurrencies are also suffering, with ETH falling below the $1,600 mark, currently at $1,547.56 as of press time, down 8.3% in the past 7 days; BNB at $559.53, down 2.2% in the past 7 days; XRP at $1.03, down 8.9% in the past 7 days; HYPE at $62.61, down 5.4% in the past 7 days.

2. Analysis of Reasons for the Broad Crypto Market Decline

1. Panic Triggered by Strategy

The slowdown in Strategy's Bitcoin buying pace may be one factor contributing to weak market sentiment. According to Strategy's report, for the week ending June 21, its Bitcoin holdings increased by 520 BTC, the lowest single-week increase in 18 months. $300 million of the net proceeds from Strategy's stock issuance during this period was used to replenish cash reserves.

Additionally, STRC is trading well below its $100 par value. On June 25, STRC hit an all-time low of $75, and as of press time, it stands at $75.69; common stock MSTR fell below the $90 mark, currently at $85.33 as of press time. The dual decline of STRC and MSTR has further intensified market concerns about its balance sheet structure and Bitcoin-related exposure risks, with investor sentiment continuing to face pressure.

Arkham Intelligence warned that persistent weakness in preferred shares could make future financing more difficult. If investor interest continues to wane, this could drag on Strategy's Bitcoin accumulation strategy over the long term.

CryptoQuant released a report on June 23 urging Strategy to stop buying Bitcoin and restore its cash reserves to approximately $2.8 billion before resuming accumulation. Strategy stated that the dividend coverage ratio has plummeted from over seven years to about 14 months.

Alexander Blume, CEO of Bitcoin institutional asset management firm Two Prime, pointed out: "Strategy's volatility continues to trigger market panic, reminiscent of other major crashes experienced by the market in the past."

2. ETF Net Outflows

On Wednesday, spot Bitcoin ETFs saw massive net outflows of up to $469 million, and on Thursday, net outflows surged to $696 million, recording six consecutive days of net outflows. The indicator of ETF net inflows or outflows is key to measuring institutional demand. Sustained net outflows from ETFs reflect a decline in institutional risk appetite, further exacerbating selling pressure in the market.

3. U.S. Stock Market Pressure and AI Suction Effect

The decline in large-cap tech stocks has dampened overall investor risk appetite, putting additional pressure on an already fragile crypto market. On Wednesday, memory chip maker Micron Technology (MU) saw its stock price surge after releasing strong earnings, but most other large-cap tech stocks fell, causing the Nasdaq to drop 0.4%.

BTC/USD daily chart against the Nasdaq and S&P 500. Source: TradingView

Even though Bitcoin does not directly compete with the AI sector, speculative capital is increasingly flowing into the AI field. The SpaceX IPO, along with investor expectations for future IPOs of OpenAI and Anthropic, is opening up a completely new direction for high-growth capital. Institutional investors are increasingly favoring companies that generate strong earnings, growing cash flows, and dominant positions. In short, at this stage, AI has replaced cryptocurrencies as the market's preferred speculative tool.

For more details, see "The Super IPO Wave: How Will It Reshape Global Financial Markets?"

Additionally, the U.S. government acquiring a 9.9% stake in Intel, proposing $2 billion in funding for quantum computing companies, opening federal land for data center projects, and establishing a "frontier model" release framework are all drawing attention to the stock market.

Bitcoin/USD (orange) vs. Gold/USD and Nasdaq 100 futures (green). Source: TradingView

Currently, Bitcoin is trading more like a high-leverage tech stock. During periods of macroeconomic stress, systemic investors typically first reduce exposure to their most volatile positions, and funds fleeing risk assets usually seek refuge in cash, short-term U.S. Treasuries, and traditional safe-haven assets rather than cryptocurrencies. Thus, whether risk appetite rises or falls, Bitcoin suffers losses.

4. Fed Rate Hike Expectations and Inflation Concerns

The market is not only digesting the capital demand from the AI boom but also the hawkish shift in stance from Walsh.

The Fed's next move is essentially certain to be a rate hike rather than a cut, and the hike may come much earlier than the market previously anticipated.

According to the CME's FedWatch tool, as traders see the probability of a U.S. rate hike by December rising from 68% a month ago to 80%, demand for assets like Bitcoin has weakened.

On the inflation front, the market's initial reaction to the U.S. May PCE data, which showed inflation accelerating to 4.1%, the highest level since April 2023, was relatively muted. Broader risk aversion spread to crypto assets, with approximately $500 million in Bitcoin leveraged long positions liquidated within an hour, accelerating this bottoming process for Bitcoin's price.

The Fed's maintenance of tight monetary policy in response to persistent inflation has led to a contraction in the total speculative capital available in financial markets. Due to reduced overall liquidity and the AI sector showing a suction effect, Bitcoin struggles to attract the sustained buying needed to reverse its long-term downtrend.

5. Decline in Short-Term Traders

CryptoQuant notes: The crypto market continues to show signs of weak speculative demand, with the year-on-year momentum of short-term holder (STH) realized price further falling into negative territory. This indicator has dropped from about -2.4% in mid-March to approximately -24% as of Tuesday, with recent buyers entering at price levels well below those of a year ago. The persistently declining indicator reflects reduced participation from short-term traders, although current readings are still better compared to previous bear market reset periods, when the indicator would fall between -55% and -65%.

CryptoQuant analyst Zizcrypto pointed out: "These indicators coincide with periods of severe reset in short-term holder cost basis, after which market conditions eventually improved." While Bitcoin's price may begin to recover before the indicator reverses, CryptoQuant says the indicator has yet to show signs of sustained improvement in short-term holder confidence.

6. CLARITY Act Still Unpassed

The CLARITY Act is the primary legislative effort to establish a crypto market structure framework in the U.S. It needs to overcome a key procedural hurdle within about five weeks before the summer congressional recess. If it fails, the bill will be delayed until the fall session, losing a potential market catalyst at a critical time.

Crypto journalist Eleanor Terrett previously posted that to advance the crypto market structure bill CLARITY Act into law before July 4, multiple complex conditions must be met simultaneously: including finding an ethics solution acceptable to both Republicans and Democrats, revising issues in agriculture-related clauses, merging multiple bill components, and securing 60 votes in the Senate. This is "almost impossible" in terms of timing, process execution, and legislative pace.

7. Miner Selling Pressure

On-chain data platform CryptoQuant has long used miner reserves as a key observation indicator. Historically, during the 2018 bear market and the later stages of the 2022 bear market, a simultaneous decline in miner holdings, a drop in hashrate, and a price bottom were observed. After the 2024 halving, the block reward dropped from 6.25 BTC to 3.125 BTC, significantly impacting miner revenue. Against the backdrop of persistently weak Bitcoin prices, some mining companies have sold BTC reserves to supplement cash flow, further adding supply pressure to the market.

8. Bear Market Cycle Patterns

Beyond short-term negative factors, some analysts believe current market performance also aligns with Bitcoin's long-term cycle patterns.

The market generally focuses on the "four-year cycle" centered around BTC halving. After each halving, the supply of new coins decreases, and the market typically goes through four stages: accumulation phase, bull expansion, market frenzy, and deep correction. Today, more and more analysts are debating whether the "four-year cycle" still exists, with some institutions even suggesting Bitcoin's future trajectory will increasingly resemble that of macro risk assets rather than strictly following the traditional halving cycle. However, even analysts who support cycle theory generally believe that the current market has not yet shown typical on-chain characteristics of a bottom zone. Therefore, the current crypto market trend largely follows the patterns of a bear market cycle.

3. How Will the Future Market Trend?

Currently, the bullish structure is not obvious. However, the downward momentum remains strong. The MACD has crossed below the signal line, suggesting that downward pressure is easing, while the RSI at 28 indicates oversold conditions, which may slow but not yet reverse the downtrend.

Bitcoin's price may continue to decline along the path of least resistance, potentially reaching a low of $53,485 on July 5, 2024.

• Lubit Mining Pool Founder Jiang Zhuoer: Strategy's current mNAV has fallen to 0.72, close to the low of 0.7 set in May 2022 during the last bear market. Combined with recent market sentiment events such as STRC de-pegging, it is judged to be the bottom area of this cycle's mNAV. mNAV often leads BTC price bottoming by about six months. Based on the "four-year cycle" and volatility decay models, this Bitcoin bear market may bottom between October and December 2026, with a target price range of $42k to $44k. In the near-to-medium term, the strategy remains to sell spot and short, switching to buying spot and going long once the expected bottom arrives.

• CryptoQuant CEO Ki Young Ju: It cannot be confirmed that Bitcoin has already reached the bottom of this cycle. Based on log-scale chart analysis, following traditional cycle patterns, Bitcoin's current price does not appear to be near the bottom zone. As prices approach investor cost bases, risk/reward ratios typically improve significantly; however, in all major cycles, Bitcoin's price has touched the realized price. If this cycle does not see such a scenario, it may mean the market structure differs from the past.

• Chris Sullivan, Co-founder and Portfolio Manager at Digital Asset Hedge Fund Hyperion Decimus: We estimate between $54k and $57k. Perhaps the price could fall to $48k, and then completely collapse. Either that, or the price breaks through the key level of $82k. Investors are too focused on market narratives while ignoring market mechanics.

• Trader Killa: After the rebound, the price is expected to bounce back to around $70k.

• Trader RektProof: For the remainder of the month, BTC/USD will trade within a range with $60k as the bottom. "Overall, the price will shift to supply, drop back to equilibrium lows, and then rise to depressed highs above $70k."

• Hedge fund manager Philippe Laffont: Has "some concerns" about Bitcoin's future, especially with increasing venture capital opportunities.

• Billionaire investor Mark Cuban: He has sold most of his Bitcoin because it failed to act as a hedge during periods of geopolitical turmoil and a weak U.S. dollar.