Bitcoin took a nosedive from a multi-week peak of $70,000 to under $60,000 in less than seven days.
The ever-volatile cryptocurrency market was rocked once again this week, and much of the turbulence seems to be linked to the United States.
Here are some potential reasons why BTC dropped by ten grand from Monday to Sunday morning.
Weak US Economy
The week kicked off with a bang as bitcoin’s price surged by $3,000 on Monday, hitting $70,000 for the first time since early June. This spike came shortly after Donald Trump’s appearance at the 2024 BTC conference in Nashville, where he made bold promises, including firing SEC Chair Gary Gensler on his first day in office.
Trump’s pro-bitcoin stance initially boosted the market, but the euphoria was short-lived. Later on Monday, BTC tumbled by $4,000 and continued to slide through the week. By Friday evening, the cryptocurrency had dropped to $62,200 following the release of the US July jobs report.
The report indicated that the US economy might be in worse shape than expected, with the unemployment rate climbing to 4.3% – the highest since October 2021. Wall Street reacted with price declines, and the crypto market followed suit.
Bitcoin and altcoins continued their descent over the weekend due to their 24/7 trading nature, with BTC hitting a three-week low of just under $60,000, losing over ten grand in less than a week.
Fed’s Next Move
Another US-related factor is the anticipated actions of the central bank.
Earlier this week, the Bank of England lowered interest rates by 0.25 basis points in the first cut since the pandemic, joining other central banks like the ECB and the Bank of Canada.
However, the US Federal Reserve has yet to follow suit, with rates at a multi-decade peak of 5.25% to 5.50%. Pressure is mounting on Fed Chair Jerome Powell to cut rates, with Dem Senator Elizabeth Warren urging him to act now instead of waiting for September, when most experts expect a reduction.
Lower interest rates are generally seen as bullish for risk-on assets like crypto, as they make borrowing cheaper. This uncertainty regarding the Fed’s next move may be prompting some investors to exit the crypto market for now.
ETF Outflows
The weak US economy and the uncertainty around the Federal Reserve’s actions are also impacting ETF flows. Reports of a shaky economy and indecision by the Fed have spooked some investors, particularly larger ones who use ETFs for crypto exposure.
On Saturday, it was reported that outflows from spot Bitcoin ETFs skyrocketed to almost $240 million on Friday – the highest in about three months. Ethereum ETFs also saw red for a second consecutive week.
ETF flows can have an immediate impact on BTC’s price, especially outflows. Consequently, they may be a significant factor behind the asset’s fall to and below $60,000.
