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Bitcoin recently fell below $57,500, marking a 5% drop on July 4. This decline has left investors concerned about Bitcoin's future price movements. Here, we explore the possible reasons behind the dip and gather insights from experts on Bitcoin's potential trajectory.
Possible Reasons
Market Sentiment and Selling Pressure
Bitcoin's recent drop is attributed to several factors. A significant one is the lack of positive sentiment in the market. Consistent selling from spot markets has also dampened the mood among Bitcoin bulls. Anticipation over Mt. Gox payout, which will release 142,000 BTC worth about $9 billion, starting in July, has added selling pressure amid concerns about market absorption.
Impact of U.S. Inflation and Interest Rates
Investor concerns over U.S. inflation and interest rates continue to influence market behavior. Federal Reserve Chair Jerome Powell's remarks on the need for more work to tame inflation have added to the risk-averse sentiment. Powell's comments suggested that there might be only one interest rate cut this year, contrary to investors' hopes for two or more.
Long-Term Holders and Profit-Taking
A recent analysis from IT Tech indicates that the downward trend is partly due to long-term holders cashing in on substantial profits.
Long-Term $BTC Holders Realize Significant Profits, Contributing to Price Decline
— CryptoQuant.com (@cryptoquant_com) July 4, 2024
“The highest activity was observed among holders who had kept their #Bitcoin for 5-7 years.” – By @IT_Tech_PL
Full post 👇https://t.co/fjNLN9idV0 pic.twitter.com/mBpAC3w7js
On July 3, the spent output profit ratio (SOPR) from long-term holders exceeded a value of 10, meaning BTC was sold for at least 10 times the initial purchase price. These holders, who typically retain their holdings for five to seven years, have contributed to the selling pressure.
Expert Predictions on Bitcoin's Future
Michael Novogratz: $55,000-$75,000 Range
Michael Novogratz, founder of Galaxy Digital Holdings Ltd., predicted in May that Bitcoin would trade within the $55,000-$75,000 range throughout Q2 2024. He believes that new market events will drive prices higher after the current stagnation.
Novogratz attributes the market pause to strong economic readings and fading optimism over Federal Reserve rate cuts. He expects the consolidation to continue until there is an economic slowdown or post-election regulatory clarity.
Markus Thielen: Potential Drop to $50,000
In contrast, Markus Thielen, founder of 10X Research, predicts Bitcoin will break out of its consolidation range and decline toward $50,000. Thielen cites the potential realization of a double-top pattern and suggests that Bitcoin's sharp decline may just be beginning. Breaking the psychological $60,000 benchmark and moving towards $50,000 marks a significant shift in market sentiment.
Crypto Patel: Potential Drop to $55,000
Renowned crypto analyst Crypto Patel shared a bearish outlook on Bitcoin, suggesting it could drop to $55,000 in the near future. Patel's forecast is based on a technical analysis of Bitcoin’s price movement and market structure, indicating a possible decline to $55,000 and potentially even to around $53,700.
CK Zheng: Miner Selling Pressure
CK Zheng, co-founder of ZX Squared Capital, notes that Bitcoin miners need to aggressively sell their Bitcoin reserves as their costs have more than doubled following the Bitcoin halving in April. This has added further selling pressure to the market. For example, mining giant Core Scientific sold more Bitcoin than it mined last month.
On the demand side, CK Zheng believes institutional investors will jump in to build new Bitcoin positions when the price drops to an attractive level. The allocation to Bitcoin by these investors is still at an early stage, suggesting potential future demand.