The Bitcoin price has seen a significant decline of over 5% on Tuesday, dropping below $60,000 following the disappointing launch of spot Bitcoin ETF trade in Hong Kong. Additionally, new US economic data has indicated persistent inflation, leading to discussions about the Federal Reserve delaying interest rate cuts. Technical analysis suggests that Bitcoin could be heading towards a near-term correction, with the possibility of dropping to the $50,000 range. If this happens, it would mark a 30% pullback from the all-time highs reached in March.
The spot Bitcoin and Ether ETFs launched in Hong Kong fell short of expectations, with total trading volumes reaching just under $12.5 million on the first day. This was significantly lower than the predicted $300 million in inflows for the opening day. The weak debut in Hong Kong, along with a slowdown in spot Bitcoin ETF inflows in the US, has contributed to the recent downward pressure on the Bitcoin price. Despite these setbacks, the availability of ETFs in a major financial hub like Hong Kong is a significant milestone for the crypto industry.
There has been a buildup of macroeconomic challenges impacting Bitcoin, including higher-than-expected inflation in employment costs in the US. This has raised concerns that inflation may remain above the Fed’s target, leading to a possible delay in rate cuts. Market expectations for no rate cuts by September have increased to 50%, up from 6.5% a month ago. The Fed is in a “wait-and-see mode” until there is more clarity on inflation, signaling a more cautious approach to monetary policy.
The market environment, characterized by tightening financial conditions and bearish technical indicators, could push Bitcoin into the $50,000 range in the near future. However, this is unlikely to mark the end of the Bitcoin bull market that began in late 2022. There is still approximately 1.5 years left in the current bull cycle, reinforced by the recent Bitcoin halving. While the post-halving correction may dampen short-term sentiment, new all-time highs are still a possibility in late 2024 or 2025 as financial conditions ease and inflation pressures subside.
Despite current challenges, there are factors that could bolster Bitcoin in the future. Many potential US ETF buyers have yet to enter the market, and the narrative of Bitcoin as “digital gold” is gaining traction. More companies and countries may adopt Bitcoin as a reserve asset, while safe-haven demand could increase if geopolitical or financial stability concerns arise. As the market moves towards a more favorable environment with lower inflation and interest rates, Bitcoin could benefit from increased adoption and investment. The long-term outlook for Bitcoin remains positive, with potential for further growth and recognition in mainstream finance.
