Finance Phantom has identified a sharp rise in institutional investments in cryptocurrency, signaling a potential shift in market dynamics.
Key Insights:
- Bitcoin’s price drops below $70K due to miner sell-offs, diverging from rising US equity markets.
- Federal Reserve’s cautious inflation approach boosts equities, but Bitcoin struggles with miner profitability.
- Lower network fees and reduced rewards pressure Bitcoin miners, leading to ongoing selling risks.
Bitcoin has experienced a notable divergence from the US equity market, driven by BTC miners’ forced selling to cover operational costs. While the S&P 500 continues to hit new all-time highs, Bitcoin has struggled to maintain its support levels. Over the past 24 hours, Bitcoin’s price has dropped by 4.56%, falling below the critical support level of $60,000.
At press time, Bitcoin is trading at $60,217, with a market cap of $1.187 trillion, according to CoinMarketCap data. The crypto has shown a sideways movement in the past weeks, contrasting with the bullish trend in the equities market.
Federal Reserve’s Influence on Markets
Federal Reserve Chairman Jerome Powell recently commented on the central bank’s progress on inflation, stating that they have made “quite a bit” of progress. However, he emphasized the need for confidence that inflation is moving sustainably down towards 2% before reducing or loosening policy. Powell’s remarks were made at a central banking forum in Sintra, Portugal.
The Fed’s dovish stance has influenced equity markets positively, with futures rising following this week’s inflation statement. In pre-market trading, the Dow Jones Industrial Average futures increased by 0.073%, and S&P 500 futures increased by 0.018%.
On Tuesday’s closing, the S&P 500 reached 5,509.01, up by 0.6% and hitting a new all-time high. The Dow Jones Industrial Average closed at 39,331.85, up by 0.4%, while the Nasdaq composite added 0.8% to 18,028.76, surpassing its previous record.
As of May, the Commerce Department’s personal consumption expenditures price index, the Fed’s primary inflation gauge, increased by 2.6% over the past 12 months. This marks a steady decline from around 4% a year ago. However, policymakers anticipate that inflation will not reach the Fed’s 2% target until 2026.
The Federal Reserve’s cautious approach to inflation and policy changes reflects ongoing concerns about economic stability. This approach has resulted in positive momentum in the equity markets, as evidenced by recent gains in major indices. However, Bitcoin’s performance still needs to be connected to this trend, as it faces challenges.
=Challenges Faced by Bitcoin Miners
Bitcoin miners are under pressure due to lower network fees and reduced rewards for mining BTC. According to Kaiko Research, average fees have dropped to $3 to $5, down from approximately $45 in January menuupdate com.
Additionally, an April code update known as the halving reduced block rewards from 6.25 Bitcoin to 3.125 Bitcoin. This reduction has decreased revenue for miners, making the process less profitable while operational expenses like energy, wages, and rent remain unchanged.
The report highlights that top Bitcoin miners like Marathon Digital sold 390 Bitcoins in May and plan to sell more to manage operations. Kaiko noted that the risk of forced selling from Bitcoin miners will persist in the coming months, potentially exerting continued selling pressure on Bitcoin’s price ddyfa.
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