The key takeaways
- Oil prices are cooling and US Dollar is near a month-long high. These factors continue to put pressure on other assets.
- The slowest Strategy buying rate in the last 18 months, coupled with outflows from Bitcoin ETFs on a spot basis, indicate short-term risks.
Bitcoin (BTC) fell to $59,000 on Wednesday, despite a sharp drop in the price of oil. After a Memorandum of Understanding between the US, Iran and temporarily reopening the Strait of Hormuz. Inflationary Pressures have eased. Bitcoin traders are worried that the recent rise to $60,000.00 may not last as the US Dollar has strengthened.
US dollar strength index (left) vs. Bitcoin/USD (right). Source: TradingView
US Dollar jumped up to highest level in 13 months against basket of currencies, showing growing confidence about the US economy. Typically, the price of Bitcoin is negatively related to this measure, since some investors use Bitcoin as an inflation hedge, traditionally driven by oil-price increases.
Brent Crude Oil (left) and Gold, USD TradingView
Brent crude fell to below $74 and gold prices dropped below $4000 for the first month in even numbers. Brent crude is now at levels similar to those seen before the Iran conflict. Investors indicated a decline in demand for precious metals despite mild anxiety over tech sector cash flows due to the increased expenditure of AI hyperscalers.
Bitcoin Investment thesis is weakened due to reduced inflation expectations and AI sector growth
Interest rates will remain higher longer than expected, which favors fixed income investment. US Labor Department data on unemployment benefits claims fell by 4,000 in the previous week. This confirms that the US economy has not slowed down.
Source: Fed St Louis, US Monetary Base M2 (USD). Source: Fed St Louis
US government debt, regardless of risk assessments by investors regarding the profitability and viability of AI infrastructure investment over the past 3 years has driven liquidity up. The data released Tuesday showed that US Monetary Base expanded (M2) increased from $22.8 trillion to $23,05 trillion during May.
Related: Lyn Alden tips Bitcoin outperforming gold over next ‘two to three years’
Investors will seek other gains if the demand for fixed-income decreases. Investors’ biggest bet is the tech industry, which makes Bitcoin and other scarce assets less attractive.
Micron, the manufacturer of computer memory and storage devices for data, announced strong earnings in its third quarter on Wednesday. Micron has seen its market cap increase by 265% in the last six months, to reach $1.16 trillion. Most impressively, SK Hynix, Samsung and other chip manufacturers now make up 40% of South Korea’s stock market. according CNBC.
Strategy (MSTR US) Bitcoin reserve changes, BTC. Source: Strategy
This slowdown is probably a factor in the current market’s weakened sentiment. Michael Saylor’s company reported that it added 520 BTC in the week ended June 21. This was its lowest intake for a weekly period of 18 months. MSTR used $300 million in net proceeds of its stock issue during this period to fund the purchase. replenish its cash position.
Bitcoin’s performance was negatively affected by macroeconomic factors on Wednesday. Gold prices were also affected. The net flows from the spot market are heavy. Bitcoin exchange-traded funds ETFs and the disappointment at Strategy’s share price trading below its Bitcoin purchase cost has added to significant pressure. Further downside is not ruled out from this $59,000 level.
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Source: cointelegraph.com
