The Nasdaq Composite Index has been making a historic high for seven consecutive days. The Dow Jones Industrial Average and the S&P 500 Index have also reached similar highs, thanks to chip maker Nvidia and the investment frenzy surrounding artificial intelligence.
However, bitcoin has failed to keep up. Despite market observers predicting that the cryptocurrency could skyrocket to $200,000 next year, it has remained stable at around $65,000 for the past week.
Here are the four factors that are hindering this top cryptocurrency.
Halving Digestion
After a strong start earlier this year, Bitcoin is now just catching its breath. While the Nasdaq may have soared by 18% so far this year, Bitcoin has risen by 53%, according to McCarthy. This is not only because Bitcoin is often more volatile – they are just “moving on different factors.”
Bitcoin had a strong start earlier this year, thanks to regulatory developments in the United States, and the next driver for Bitcoin will be the long-term impact of the latest halving and ETF demand.
The fourth halving in mid-April this year reduced the number of bitcoins miners received for maintaining the blockchain. As new bitcoins are created less, market participants expect the supply shock to drive prices up. But the impact of the halving usually takes months to show, and most of it is only visible when demand for Bitcoin is increasing.
ETF demand in the United States could have a significant impact here, as more advisors and companies are expected to onboard new investors over the next few months.
CCData research analyst Jacob Joseph agrees with this view, believing that there is usually a period of flat trading for several months after the quadrennial event. This is especially true as the market was overheated in the months leading up to the halving.
The central exchange recorded new all-time highs in March, and open interest in speculative trading “reached unprecedented levels.” Open interest is an indicator of the total number of outstanding futures contracts. High open interest is often due to speculative frenzy.
In this sense, the market needs the current cooling-off period or price consolidation to see typical rapid price expansions for Bitcoin and other digital assets.
ETF Fund Outflow
Last week saw the most severe outflow of funds from spot bitcoin ETFs since March, with a total of $620 million. The short-term fund outflows from spot Bitcoin ETFs also fueled negative sentiment in the market, affecting the price of the assets.
However, the upcoming launch of Ethereum ETFs, coupled with recent positive macroeconomic data, suggests that Bitcoin and other major digital assets are likely to reverse the trend soon and aim for a new cycle high.
Mt. Gox
Once the world’s largest cryptocurrency exchange, Mt. Gox has been shrouded in the industry ever since it collapsed after a hacker attack in 2014. The reason? About $9.2 billion in bitcoins are being held in bankruptcy, waiting to be repaid to creditors.
It now appears that these 142,000 bitcoins may be poured into the market at any time before October 31, which is Mt. Gox’s final repayment deadline, and the market may just be waiting for the occurrence of these redemption events.
“A large-scale redemption of Bitcoin is unlikely,” David Duong, research director at the cryptocurrency exchange Coinbase, recently told DL News. However, concerns about these redemptions could still limit liquidity, as market participants may avoid deploying new capital in uncertainty.
Miners Selling Holdings
Bitcoin miners are also putting pressure on the price of this top cryptocurrency.
Despite the halving limiting the number of new bitcoins that mining companies can create and sell, most of these companies still hold large reserves of bitcoins. According to data from analytics company CryptoQuant, the industry has sold about $300 million in bitcoin reserves since the beginning of the year. The largest publicly traded miner in the United States, Marathon Digital, sold over $920 million in June alone, accounting for about 8% of its $1 billion reserves.