Cryptocurrency Market Opens the Second Half of the Year on an Upward Trend
The latest data on US manufacturing activity shows that the US manufacturing PMI fell further into contraction territory in June, hitting a four-month low. This has increased investors’ hopes of a rate cut by the Federal Reserve in September, as the economy seems to show signs of weakness. Investors are still waiting for the June jobs report, which will be released on Friday. If the report shows further signs of a cooling labor market, it will provide more support for a rate cut.
Bitcoin, in particular, has rebounded in the early trading session and has surpassed the support level of $62,800, reaching a daily high of $63,820 after noon. As of the time of writing, the trading price of Bitcoin is $63,263, with a 24-hour increase of 2%. Most of the top 200 altcoins have followed the upward trend of Bitcoin.
Among them, LayerZero (LZO) has seen the largest increase, rising by 15.1%, with a trading price of $3.83. Bonk (BONK) has risen by 14.1%, and Ethereum Name Service (ENS) has risen by 11.7%. Arkham (ARKM) has seen the largest decrease, falling by 8.7%, followed by Convex Finance (CVX) with a decrease of 7.1%, and io.net (IO) with a decrease of 4.4%.
The current total market capitalization of cryptocurrencies is $2.32 trillion, with Bitcoin’s market share at 53.5%.
In the US stock market, the S&P 500, Dow Jones, and Nasdaq indices all closed higher, with increases of 0.27%, 0.13%, and 0.83%, respectively.
Bitcoin’s price may be approaching or has already hit bottom, according to CryptoQuant data. The premium index of Bitcoin on Coinbase has dropped to its lowest level since the collapse of FTX. Similar values in November 2022 and August 2023 were accompanied by the price hitting bottom and subsequently rebounding.
David Lawant, Head of Research at institutional cryptocurrency trading platform FalconX, wrote on X platform: “The darkness is always darkest before dawn. The last time the Coinbase premium was so low was a few months before the massive rebound from October 2023 to March 2024.”
According to data from analysis firm CryptoQuant, this indicator has been in negative territory for most of June and May, similar to the market downturn in August and September last year. On Friday, the indicator dropped to nearly -0.19, its lowest level since the FTX crash in November 2022.
The negative value in early November 2022 coincided with the bear market low of BTC, which was below $16,000, and the price subsequently soared to nearly $25,000 in February, an increase of over 50%.
The lowest premium point in August 2023 occurred a few weeks before Bitcoin reached a local bottom of around $25,000. Afterwards, BTC fluctuated within a range. From October to January, driven by the expectation of a US Bitcoin ETF, the price of BTC first doubled and then hit a record high.
Lawant stated, “At least recently, the Coinbase premium has become a reliable, confirmatory, and even forward-looking indicator of the overall market trend, highlighting the significant influence of the US market in determining market price formation. There are signs that the next 6 to 12 months will be exciting but also potentially turbulent.”
Considering the upcoming catalysts that are centered around the US market, such as ETF flows, US monetary policy, and the presidential election, Lawant expects this trend to continue.
Tailwinds and Headwinds
Despite the rebound, Bitfinex analysts pointed out that Bitcoin has failed to maintain the positive momentum it had at the beginning of the year, and in recent weeks, specific factors have further hindered the prices of digital assets, ending the first half of the year on a low note.
As long-term holders resumed selling and oversupply had an impact on the market, BTC also decoupled from the US stock market in June.
Analysts stated, “The policy environment has led to a decrease in volatility, which has affected the price of Bitcoin. BTC has struggled to maintain its upward momentum and decoupled from the US stock market, while long-term Bitcoin holders who paused their selling in early May have returned. Although the decrease in selling by mining companies indicates market stability, the continuous selling by long-term holders implies a fragile outlook in the near term.”
Analysts also pointed out, “Meanwhile, oversupply continues to put pressure on the market, as Mt. Gox creditors and the German Federal Criminal Police Office (Bundeskriminalamt) may sell Bitcoin, creating potential selling pressure.”
As for tailwinds, Bitfinex emphasized that the “preferred inflation gauge of the Federal Reserve, the Personal Consumption Expenditures Index, remained unchanged in May, indicating that the inflation rate is currently only slightly above the Fed’s 2% target.”
They stated, “People hope that this may push for a rate cut in September. The third estimate of US GDP for the first quarter supports the reasons for taking such action, as the data shows that the economy remains fragile despite a slight uptick. In addition, due to high mortgage rates and limited supply, consumer confidence is declining and the proportion of consumers planning to buy homes is low. They hope for a rate cut to come soon.”
Regarding the direct impact on Bitcoin prices, Bitfinex analysts stated that although it is expected that profits will be realized during a bull market, the recent scale of selling by long-term holders has raised concerns.
They warned, “If long-term holders continue to take profits at current levels (which we believe is unlikely to happen for a prolonged period), it may exert downward pressure on Bitcoin prices in the short term, possibly extending the current downtrend and impacting the bull market in the medium term.”
Despite many analysts describing the sideways price movement of Bitcoin in the past four months as “boring,” Ki Young Ju, Founder and CEO of cryptocurrency analytics company CryptoQuant, stated on X platform that periods of low market volatility are when whales accumulate the most, and Bitcoin is still in a bull market cycle.
Author: Mary Liu
