Bitcoin diverges from US equities amid supply issues

Bitcoin (BTC) has undergone a significant change in market behavior, diverging from the currently bullish U.S. equities, as it faces challenges in its attempt to surpass the $63,000 price level.

According to a Bitfinex report shared with, H1 2024 began with optimism for the market, leading to a Bitcoin all-time high above $73,000. However, this enthusiasm weakened by mid-year, with Bitcoin struggling in June due to several headwinds. BTC is now down nearly 15% from its March peak.

Per Bitfinex analysts, prevailing policies have significantly diminished Bitcoin’s volatility and hindered its upward momentum. Data from Santiment indicates a drastic drop in Bitcoin’s weekly volatility from 0.1306 in mid-March to a yearly floor of 0.0198 in June.

BTC price and volatility – July 2 | Source: Santiment

Bitfinex analysts highlighted that long-term holders, who had paused their selling activities in early May, have resumed offloading their holdings. This resumption of sales, coupled with a supply overhang, continues to weigh heavily on the market.

On-chain metrics indicate that long-term holders are taking profits again, even at prices below 2021’s ATH of around $69,000. While miner sell-offs have decreased, suggesting some market stabilization, long-term holders’ high levels of profit realization make the near-term outlook for Bitcoin bearish.

One major factor contributing to the supply overhang is the potential selling by Mt. Gox depositors and the German government. Both entities have substantial Bitcoin holdings and may choose to liquidate their assets. This reality has further added to investor FUD (fear, uncertainty and doubt).

In the broader macroeconomic environment, some signs could potentially benefit risk assets like Bitcoin, per the report. The Personal Consumption Expenditures Index, which the Feds use as a model for assessing inflation, remained stable in May. Analysts added that this stability raises optimism about a potential rate cut in September. 

Supporting this perspective, the latest third-quarter estimate for U.S. GDP reveals underlying weaknesses. This comes amid a gradual drop in consumer confidence.

Despite these potentially favorable economic conditions, Bitcoin has not benefited as expected. Instead, BTC has decoupled from U.S. equities, which have continued their upward trajectory. In June, Bitcoin dropped by over 8%, while the SPX witnessed a 3.5% gain. 

According to Bitfinex analysts, supply factors are not the only culprits for this divergence. They point to speculative buying and news-induced selloffs. BTC is now impacted more by negative news due to the drop in interest across the spot market and the recent negative net flows from investment products.

Despite a generally positive outlook for BTC in July, the asset is already down 0.18% this month due to a 0.35% drop this morning. Bitcoin is trading at $62,675 at the time of writing, having erased the mild gains it picked up on the first day of the month.


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