Bitcoin began the week on a downward trajectory, continuing its descent to $60,000. The leading cryptocurrency fell over 4%, reaching $61,211, according to Coin Metrics. Earlier, it touched $60,666.30, its lowest level in over a month, and has seen an 8% drop over the past week.
The decline in Bitcoin's value coincides with a broader trend of outflows from digital asset investment products. CoinShares reported that last week marked the second consecutive week of outflows, with crypto investment products experiencing their lowest trading volumes globally since the launch of U.S. Bitcoin ETFs in January. James Butterfill, head of research at the crypto-focused asset manager CoinShares, told CNBC, "We have now seen $1.2 billion of outflows from crypto ETFs over the last two weeks which all began after the FOMC meeting. Our belief is that continued pessimism over the number of rate cuts is weighing on sentiment for crypto."
Butterfill added that the Federal Reserve's stance on interest rates is crucial. "The Fed has indicated they need to see further evidence of inflation falling before they become more dovish, so any macro data that highlights inflation continues to fall will likely support prices, and conversely, inflationary data will weigh on prices."
Market participants are particularly jittery ahead of the release of the personal consumption expenditure (PCE) index, the Fed's preferred inflation gauge, due this Friday. Eleanor Gaywood, head of strategy at Coincover, noted that signs of a rate cut in September could ease investor nerves and potentially stabilize Bitcoin's price.
Additionally, Bitcoin has seen a significant rise in long liquidations, forcing traders to sell their assets at market price to settle their debts. CoinGlass reported that $97.83 million in long Bitcoin liquidations have occurred across centralized exchanges in the past 24 hours.
The decline in Bitcoin has reverberated across the cryptocurrency market. Ether dropped 4%, while Solana's token fell 3%, XRP slipped 1%, and Dogecoin, the meme token, declined nearly 5%. The bearish trend extended to equities tied to the crypto market, with Coinbase retreating by nearly 4% and MicroStrategy declining more than 5% in premarket trading. Miners also saw a broad decline.
Last week, CryptoQuant suggested that Bitcoin could slide back to $60,000 after breaking below the key support level of $65,800 due to a lack of bullish momentum. The company's on-chain data indicated that traders have been reducing their holdings since Bitcoin touched $70,000 in late May and have yet to start buying again.
For the month, Bitcoin is down nearly 10%. At the start of June, it briefly reached $71,000 but has been on a steady decline since. It has been largely stuck in a narrow range between $60,000 and $70,000 since mid-March when it reached its all-time high of $73,797.68.
Despite the recent downturn, investors and analysts remain optimistic about Bitcoin's long-term prospects. Ryan Rasmussen, an analyst at Bitwise Asset Management, described the current price action as "bullishly choppy." He highlighted Bitcoin's 43% year-to-date gain, progress on Ether ETFs, and shifting political tides in favor of crypto as positive indicators. "From a long-term investment thesis, Bitcoin has rarely been more attractive than it is right now," Rasmussen said.
