Key facts: Several factors are adding up to push the price of bitcoin down. For the near future, analysts' expectations are divided. Bitcoin (BTC) opens this Thursday, August 15, lower. At the time of this publication, the price drop in dollars in the last 24 hours is close to 5%. Thus, bitcoin is close to having the same price it reached just 7 days ago, thus erasing all the weekly profitThe latter can be seen in the following price chart:
Bitcoin price over the past 7 days. Source: CoinGecko. Something that can explain these bitcoin price drops is the behavior of spot ETFs (or spot) that are traded on the US stock market. Yesterday, August 13, these financial products had, as a whole, a negative day. Net capital outflows from bitcoin ETFs were $81 million. As explained in Criptopedia (educational section of BitcoinDynamic), spot ETFs are backed by the underlying asset, in this case, by bitcoin. Investment fund management companies must hold BTC in their treasuries (or in those of third parties they have designated for that purpose) in order to back the ETFs. This means that the behavior of bitcoin ETF investors can have a direct impact on the price of the digital currency. If there is a high demand, ETF managers must go to the market to buy BTC to back the funds. On the other hand, if the opposite occurs, Management companies can sell bitcoin to redeem investors who want to withdraw completely or partially from the market. The following chart, provided by SoSoValue, shows how bitcoin ETFs have performed, day by day:
Money flow into and out of bitcoin ETFs, day by day. Source: SoSoValue. Strikingly, ether (ETH) ETFs, the cryptocurrency of the Ethereum network, had a low but positive net capital flow day yesterday, with $10 million in inflows. Another factor that can explain the price drop is the fact that The US government is apparently selling bitcoin which it once confiscated. BitcoinDynamic reported yesterday that 10,000 BTC from the Silk Road case were sent to the Coinbase exchange. According to Arkham Intelligence, an on-chain analysis firm, the aforementioned movement valued at just over USD 590 million was recorded. The transfer was made from a wallet linked to the US government to a Coinbase Prime service deposit wallet.
While this is not a very large sum (compared to, for example, the 50,000 BTC sold by Germany or the 140,000 BTC being distributed by Mt. Gox), it shows that the current US administration has little (or no) interest in being a Bitcoin holder. This may create distrust in the market.
The transfer of 10,000 BTC to Coinbase Prime was made on August 14. Source: Arkham Intelligence. Also, it should be noted that Bankrupt exchange Mt. Gox has not finished distributing bitcoin to creditors. According to on-chain data, there are still 46,000 BTC left to distribute, which constitutes a potential downward pressure for the digital currency (in case those who received them decided to sell them en masse). As a final bearish factor, not only for bitcoin but for all financial markets, we can mention the fact that Tensions in the Middle East continue to escalatewith threats and warnings between the two sides in the conflict: Iran and Israel. The Iranian government denied that it will back down on its position and assured that it does not need any authorization to respond with weapons to its enemy. For its part, the United States warns that Iran could attack Israel this week.
Tensions are rising in the Middle East. Source: stock.adobe.com In such contexts, Investors tend to become cautious and prefer assets considered safe, such as gold, Treasury bonds or even cash. For this reason, bitcoin, cryptocurrencies and stocks tend to suffer.
High volatility expectations for bitcoin
BitcoinDynamic reported yesterday that the only sure thing for these days, with bitcoin, is the high volatility. Evidently the analysis was correct. Several analysts are beginning to make their predictions. The Spanish trader known on social media as SantinoCripto, for example, says he has “bad feelings.” Although he continues to maintain bullish expectations and says bitcoin would seek new historical highs in 2024 or 2025 (according to him, above $120,000), he does not rule out that the scenario may not be as optimistic as he predicts. For SantinoCripto, “both at the level of geopolitics, as well as bitcoin and cryptocurrencies and the rest of the financial markets” 2 difficult years are coming.
«I think they are preparing something big that will cause a historic crash in the economy and at a geopolitical level. I hope it does not translate into wars, but the atmosphere is very heated, the Ukraine-Russia and Israel-Iran conflicts could involve superpowers like the US and China.» SantinoCripto, cryptocurrency trader.
Michael Van de Poppe, another financial market expert, downplays the importance of this price drop. According to him, the inflation data in the United States favor a cut in interest rates in that country (which could happen in September). This, he says, will cause Increase the probability of bullish action for the price of bitcoin. Analysts at Grayscale, a fund management company (including Bitcoin and Ether ETFs) also maintain bullish expectations. They assure that This year, Bitcoin will reach new historical highs in its price. In such scenarios, with such divided opinions, a DCA strategy can be useful for investors who maintain bullish expectations about bitcoin in the long term.