Eight major reasons cause BTC to fall below $60k How will the subsequent market go?

Tao Zhu, Jinse Finance

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

I. 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, with a one-week decline of 6.88%; a one-month decline of 19.84%; a six-month decline of 29.97%; and a one-year decline of 30.33%.

BTC is priced at $59,346.65, with a one-week decline of 5.66%; a one-month decline of 21.75%; a six-month decline of 32.41%; and a one-year decline of 32.22%.

Other major cryptocurrencies are also performing poorly. ETH has fallen below the $1,600 mark, currently trading at $1,547.56 as of press time, down 8.3% in 7 days; BNB is at $559.53, down 2.2% in 7 days; XRP is at $1.03, down 8.9% in 7 days; HYPE is at $62.61, down 5.4% in 7 days.

II. Analysis of Reasons for the Widespread Crypto Market Decline

1. Panic Triggered by Strategy

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

Additionally, STRC is trading well below its anchor value of $100. On June 25, STRC hit an all-time low of $75, and as of press time, it is trading at $75.69. Common stock MSTR has fallen 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 risk, putting continued pressure on investor sentiment.

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

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

Alexander Blume, CEO of Bitcoin institutional asset management firm Two Prime, pointed out: "Strategy's volatility continues to spark market panic, reminiscent of other major sell-offs the market has experienced before."

2. ETF Net Outflows

On Wednesday, spot Bitcoin exchange-traded funds (ETFs) saw massive net outflows of up to $469 million. On Thursday, ETF net outflows reached as high as $696 million, marking six consecutive days of net outflows. The ETF net inflow or outflow indicator is key to measuring institutional demand. Persistent ETF net outflows reflect a decline in institutional risk appetite and further exacerbate market selling pressure.

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

The decline in large-cap tech stocks has dampened investors' overall risk appetite, adding further pressure to the already fragile cryptocurrency 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, dragging the Nasdaq down 0.4%.

BTC/USD daily chart compared to 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 space. The SpaceX IPO, along with investor expectations for future IPOs of OpenAI and Anthropic, is opening a brand new investment direction for high-growth capital. Institutional investors are increasingly favoring companies that can generate strong earnings, growing cash flows, and dominant market positions. In short, at this stage, AI has replaced cryptocurrency as the market's preferred speculative tool.

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

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

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

Currently, Bitcoin's trading performance resembles that of a highly leveraged tech stock. During periods of macroeconomic stress, systematic 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. Therefore, Bitcoin suffers regardless of whether risk appetite rises or falls.

4. Fed Rate Hike Expectations and Inflation Concerns

The market is not only digesting the capital demands of the AI boom but also the hawkish shift in Warsh's stance.

It is now essentially certain that the Fed's next move will be a rate hike rather than a cut, and the hike may occur 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 before 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 Personal Consumption Expenditures (PCE) data, which showed inflation accelerating to 4.1%—the highest level since April 2023—was not strong. Broader risk-off sentiment spilled over into crypto assets, with approximately $500 million in Bitcoin leveraged long positions liquidated within an hour, accelerating Bitcoin's price decline to this bottom.

The Fed's maintenance of tight monetary policy to combat persistent inflation has reduced the total amount of speculative capital available in financial markets. With overall liquidity shrinking and AI exhibiting a siphoning effect, Bitcoin is struggling to attract the sustained buying needed to reverse its long-term downtrend.

5. Decline in Short-Term Traders

CryptoQuant points out: The crypto market continues to show signs of weakening speculative demand, with the year-on-year momentum of short-term holder (STH) realized prices falling further into negative territory. This indicator has dropped from approximately -2.4% in mid-March to around -24% by Tuesday, with recent buyers entering at price levels far below those of a year ago. The continuously declining indicator reflects a decrease in short-term trader participation, although the current reading is still better compared to previous bear market reset periods, when the indicator fell to between -55% and -65%.

CryptoQuant analyst Zizcrypto noted: "These indicators coincide with periods of severe reset in short-term holder cost bases, after which market conditions eventually improved." While Bitcoin prices may begin to recover before the indicator reverses, CryptoQuant states that the indicator has not yet shown signs of sustained improvement in short-term holder confidence.

6. CLARITY Act Still Not Passed

The CLARITY Act is the primary legislative effort to establish a cryptocurrency market structure framework in the United States. The bill needs to overcome a key procedural hurdle within about five weeks before Congress's summer recess. If it fails to pass, the bill will be delayed until the fall, losing a potential market catalyst at a critical time.

Crypto journalist Eleanor Terrett previously stated that to advance the crypto market structure bill CLARITY Act into law before July 4, multiple complex conditions would need to be met simultaneously: including finding an ethical solution acceptable to both Republicans and Democrats, revising issues in agricultural-related provisions, merging multiple bill contents, and securing 60 votes in the Senate—which is "almost impossible" given the timeline, procedural 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 both the 2018 bear market and the later stages of the 2022 bear market, there have been simultaneous phenomena of declining miner holdings, falling hashrate, and price bottoms. 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 weakening Bitcoin prices, some mining companies are selling their BTC reserves to supplement cash flow, further increasing market supply pressure.

8. Bear Market Cycle Patterns

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

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

III. What Is the Future Market Outlook?

The bullish structure is not obvious at present. However, the downward momentum remains strong. The Moving Average Convergence/Divergence (MACD) indicator has fallen below the signal line, suggesting downward pressure is weakening, while the Relative Strength Index (RSI) stands at 28, indicating oversold conditions, which may slow but has not yet reversed the downtrend.

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

• Jiang Zhuoer, Founder of LakeBTC Mining Pool: The current mNAV of Strategy has fallen to 0.72, close to the low of 0.7 reached during the last bear market in May 2022. Combined with recent market sentiment events such as STRC de-pegging, it is judged that we are currently in the mNAV bottom zone of this cycle. mNAV tends to lead BTC price bottoms by about 6 months. Based on the "four-year cycle" and the decreasing volatility model, 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 go short, then switch to buying spot and going long when the expected bottom arrives.

• Ki Young Ju, CEO of CryptoQuant: It is currently unclear whether Bitcoin has reached the bottom of this cycle. Based on logarithmic scale chart analysis, in line with traditional cycle patterns, Bitcoin's current price does not appear to be near the bottom zone. As the price approaches investor cost basis, the risk-reward ratio typically improves significantly. In previous major cycles, Bitcoin prices have touched the realized price. If this cycle does not see such a situation, it may indicate a different market structure than in the past.

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

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

• Trader RektProof: BTC/USD will have $60k as the lower bound within its trading range for the remainder of the month. "Overall, the price will turn to supply, fall back to equilibrium lows, and then rise again to depressed highs, exceeding $70k."

• Hedge Fund Manager Philippe Laffont: "Somewhat concerned" about Bitcoin's future, especially given the increasing opportunities in venture capital.

• 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 weakening U.S. dollar.