Crypto Market Slides Amid Macro Economic Concerns Despite Notable Bitcoin Buys
Summary:
The total value of the cryptocurrency market fell 3.9% between June 20-21, reaching a five-week low at $2.34 trillion. This shake included all top-10 coins, with significant drops in Bitcoin, Ether, and BNB. This downtrend was initially attributed to a large sale of Bitcoin by the German government. However, considering subsequent significant purchases by MicroStrategy, traditional finance investors' reactions to unfavorable macroeconomic data seem more influential. With no other regulatory changes to blame, focus shifts to macroeconomic data and the traditional finance industry during such uncertain periods.
Between June 20th and June 21st, the total valuation of the cryptocurrency market saw a 3.9% dip, falling to its five-week low of $2.34 trillion. No coin in the top ten was spared in this decline, including Bitcoin (BTC) with a slide of 4.2%, Ether (ETH) with a loss of 4%, and BNB (BNB) which suffered a 4.2% correction. Despite recouping some intraday losses, the crypto market is still predominantly bearish.
Some attribute this market downturn to a significant Bitcoin dump by the German government. This discounts the influence of unfavourable macroeconomic data that could potentially incite worry among traditional finance traders about stock market peaking and the fraying fiscal situation in the U.S.
As reported by onchain crypto analytics firm Arkham, on June 19th, a wallet associated with the German government moved 6,500 BTC (worth $425 million at the time) to exchanges. This wallet containing approximately 50,000 Bitcoin is believed to have originated from Movie2k, a notorious pirated movie website in operation back in 2013. With evidence of the funds ending up in Kraken, Bitstamp, and Coinbase, there's little room for doubt regarding its purposeful sale.
However, counteracting this perceived market downturn trigger is the June 20th announcement by U.S.-based business intelligence firm MicroStrategy regarding its latest purchase of an additional 11,931 BTC worth $786 million. This well more than consumed the selling pressure, even considering the $292 million net outflow from U.S. spot Bitcoin exchange-traded funds across two days.
Without any other plausible regulatory changes or events that could negatively skew the mood of crypto investors during this period, it's advisable to turn our attention to traditional finance sectors, especially macroeconomic data. During periods of uncertainty, traders often flee from riskier investments despite the short-run relationship between the S&P 500 index and the crypto world.
Bloomberg has reported that the U.S. stock market is bracing itself for a "triple witching", a quarterly event where derivatives contracts related to stocks, index options, and futures mature - a collective worth of $5.5 trillion set to hit on June 21st. With the S&P 500 inching towards its record high, investors grow fearful of worse macroeconomic data and the ensuing increased risk of recession.
Names such as the continued drop in U.S. existing home sales, underperformance of PMI readings for services and manufacturing in France and Germany, the U.K's PMI indicating slower private-sector growth, and Japan reporting higher inflation in May add fuel to the fire.
TD Securities' head of U.S. rates strategy, Gennadiy Goldberg, mentioned in a conversation with Reuters that Congress' suspension of the U.S. debt ceiling until early 2025 might lead to another standoff potentially causing a further downgrade in the sovereign credit rating. "There's some concern indicated by the 5-year credit default swaps (CDS) on U.S. sovereign debt," he added.
And worsening sentiment became even more solidified after China's annual mid-year e-commerce festival reported by retail data provider Syntun saw sales decline for the first time in eight years. JD.com, the second-largest e-commerce platform in terms of annual sales marked the festival, which recorded gross sales of $102.3 billion in 2024 - a 7% drop from the previous year.
In this context, investor movement away from currencies like the euro, British pound, Swiss franc, and others, led to the U.S. dollar Strength Index (DXY) reaching its 50-day high at 105.85. While the S&P 500 index held firm on June 21, Bitcoin's 52% gain YoY in 2024 became a cause for traders to realize profits and limit exposure owing to growing macroeconomic uncertainty.
Remember, this article does not offer investment advice or recommendations. Any investment or trading activity carries risk. Readers are strongly encouraged to do their own research before making any decisions.
Published At
6/21/2024 11:03:49 PM
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