Eight major reasons caused BTC to fall below $60k. How will the subsequent market trend?

Tao Zhu, Jinse Finance

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

I. Overview of Crypto Market

According to Tradingview data, as of press time, the total market capitalization of the crypto market is $2.02 trillion, down 6.88% over the week; down 19.84% over the month; down 29.97% over the half year; and down 30.33% over the year.

The price of BTC is $59,346.65, down 5.66% over the week; down 21.75% over the month; down 32.41% over the half year; and down 32.22% over the year.

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

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

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

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

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

Alexander Blume, CEO of Two Prime, a Bitcoin institutional asset management firm, pointed out: "Strategy's volatility continues to trigger market panic, reminiscent of other major crashes 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, and on Thursday, ETF net outflows surged to as high as $696 million, recording six consecutive days of net outflows. The net inflow or outflow indicator of ETFs is key to measuring institutional demand. Persistent net outflows from ETFs reflect a decline in institutional risk appetite and further exacerbate market selling pressure.

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

The decline in large-cap tech stocks has dampened overall investor risk appetite, putting additional pressure on 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, causing the Nasdaq to drop 0.4%.

Daily chart of BTC/USD compared to the Nasdaq and S&P 500 indices. 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 brand new investment direction for high-growth capital. Institutional investors are increasingly leaning towards 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, proposing $2 billion in funding for quantum computing companies, opening federal land for data center projects, and developing a "frontier model" release framework will all attract people's attention to the stock market.

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

Currently, Bitcoin is trading more like a highly leveraged tech stock. During periods of macroeconomic stress, systemic investors typically first reduce their exposure to the most volatile holdings, and funds fleeing risk assets usually seek refuge in cash, short-term U.S. Treasuries, and traditional safe-haven assets, rather than cryptocurrencies. Therefore, regardless of 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 Warsh's stance.

It is now essentially certain that the Fed's next move will be to raise rates rather than cut them, and the rate hike may come much sooner than the market previously expected.

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%, market demand for assets like Bitcoin has weakened.

On the inflation front, the market initially had a muted reaction to the U.S. May Personal Consumption Expenditures (PCE) data showing inflation accelerating to 4.1%, the highest level since April 2023. Broader risk aversion spread to crypto assets, resulting in approximately $500 million in Bitcoin leveraged long positions being liquidated within an hour, accelerating Bitcoin's price decline.

The Fed's tightening monetary policy in response to persistent inflation has shrunk the total amount of speculative capital available in financial markets. With overall liquidity decreasing and AI demonstrating a siphon effect, Bitcoin is struggling to gain the sustained buying needed to reverse its long-term downtrend.

5. Decrease in Short-Term Traders

CryptoQuant noted that the crypto market continues to show signs of weakening speculative demand, with the short-term holder (STH) realized price year-over-year momentum falling further into negative territory. This indicator has dropped from approximately -2.4% in mid-March to about -24% on Tuesday, with recent buyers entering at much lower price levels than a year ago. The persistently declining indicator reflects a decrease in short-term trader participation, although the current reading is still relatively better than previous bear market reset periods, when the indicator would drop to between -55% and -65%.

CryptoQuant analyst Zizcrypto pointed out: "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 stated 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 initiative to establish a crypto market structure framework in the United States. The bill needs to overcome a key procedural hurdle in about five weeks before the congressional summer recess. If it fails to pass, the bill will be delayed until the fall session, thereby losing a potential market catalyst at a critical time.

Crypto journalist Eleanor Terrett previously stated that to advance the crypto market structure bill, the CLARITY Act, into law before July 4, multiple complex conditions would need to be met simultaneously: finding an ethical solution acceptable to both Republicans and Democrats, amending issues in agricultural-related provisions, merging multiple bill contents, and securing 60 votes in the Senate—which is "almost impossible" given the timing, 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, whether during the 2018 bear market or the late 2022 bear market, there has been a phenomenon where declining miner holdings, falling hash rate, and price bottoming occurred simultaneously. After the 2024 halving, the block reward decreased from 6.25 BTC to 3.125 BTC, significantly impacting miner revenue. Against the backdrop of continued weakness in Bitcoin prices, some mining companies have been selling their BTC reserves to supplement cash flow, further increasing market supply pressure.

8. Bear Market Cycle Patterns

Beyond short-term bearish factors, some analysts believe that the current market performance also aligns with Bitcoin's long-term cyclical patterns.

The market widely 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 market expansion, market frenzy, and deep correction. Nowadays, 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 traditional halving cycles. However, even analysts who support the 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 conforms to the patterns of a bear market cycle.

III. What Is the Outlook for the Future Market?

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

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

• Jiang Zhuocr, Founder of LakeBTC Mining Pool: The current mNAV of Strategy has dropped to 0.72, close to the low of 0.7 recorded in May 2022 during the previous bear market. Combined with recent market sentiment events such as STRC de-pegging, it is judged that the market is currently in the mNAV bottom zone of this cycle. mNAV tends to lead the BTC price bottom by about 6 months. Based on the "four-year cycle" and volatility decay model, this Bitcoin bear market may bottom out 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, and 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, according to traditional cyclical patterns, Bitcoin's current price does not appear close to the bottom zone. As the price approaches the investor cost basis, the risk-reward ratio typically improves significantly. In all major past cycles, Bitcoin's price has touched the realized price. If this cycle does not see such a situation, it may indicate a different market structure from 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 drop to $48k, and then completely crash. Or the price will break through the key level of $82k. Investors are too focused on market narratives and ignoring market mechanisms.

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

• Trader RektProof: BTC/USD will have $60k as the lower limit within its trading range for the remainder of the month. "Overall, the price will shift to supply, fall back to the equilibrium low, and then rise again to the depressed high, above $70k."

• Hedge Fund Manager Philippe Laffont: Has "some concerns" about Bitcoin's future, especially amid increasing venture capital opportunities.

• Billionaire Investor Mark Cuban: He has sold most of his Bitcoin because Bitcoin failed to act as a hedge during periods of geopolitical turmoil and a weakening dollar.