The crypto market has seen a significant decline in recent days, which has led casual observers and seasoned analysts to scrutinize the underlying causes. In the last 24 hours, only XRP (+0.8%) and ENS (+0.2) from the top 100 are the least green market averages outside of stablecoins. A comprehensive IT Tech analysis, published in CryptoQuant, breaks down the various forces at play. Here’s a closer look at three key factors contributing to the recent decline.
#1 Bitcoin Miner Capitulation
One of the most influential factors cited in the recent decline is what is known as miner capitulation. Crypto miners, the backbone of Bitcoin, are facing a huge drop in revenue, down 55%. This huge drop is forcing miners to end the quotas in order to continue the work.
The analysis points to an increase in Bitcoin being transferred from miners’ wallets to exchanges, which is the traditional precursor to trading. “This increase in transfers between miners to exchanges is a clear sign of increased selling pressure, as miners try to manage their funds amid declining revenue,” explained the IT Tech report.
#2 Lack of New Crypto Stablecoin Issuance
The second major factor is the stand on issuance of key coins such as USDT (Tether) and USDC (USD Coin). Stablecoins generally provide an on-ramp for new capital into cryptocurrencies. “Without new releases, there is a bottleneck effect, reducing overall market turnover and increasing price volatility,” notes CryptoQuant’s analysis.
Stablecoins are essential for liquidity and stability in crypto markets. They allow investors to move large sums of money into and out of cryptocurrencies without the need to convert directly to and from fiat currency, which can be a slow and expensive process. A reduction in emissions means less fiat is being converted into crypto, reducing the buying pressure that is essential to fueling the bull run.
#3 Exit BTC ETFs
Significant outflows from US Bitcoin ETFs are also exerting downward pressure on the market. Notably, major withdrawals from industry giants such as Fidelity and Grayscale have been recorded. “The Fidelity Bitcoin ETF saw an outflow of more than 1,384 BTC on June 17 alone, indicating a significant shift in investor sentiment,” according to the report.
These exits are particularly influential because they represent broader sentiment in the investment community, which often leads to negative results as individual or institutional investors react to the move.
Despite these challenging circumstances, IT Tech raises a potential silver lining. Historical data shows that longer miner mining times coupled with a higher hash rate may indicate a market is approaching, which may indicate stabilization or a rebound. “The average realized value of $62,400 for short-term Bitcoin holders represents an important level of support. If this holds, it may prevent further declines and stabilize the market,” the analysis concludes.
In the near term, the recovery of the cryptocurrency market will likely depend on several factors, including the increase in stablecoin issuance that will bring in revenue again, the stabilization of Bitcoin mining economics, and the easing of institutional outflows. Although the current situation is still volatile, these indicators will be very important to look for signs of a sustained recovery or continued decline.
At press time, BTC traded at $65,088.
The featured image was created with DALL·E, a chart from TradingView.com
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