The recent sharp drop in cryptocurrency prices, including Bitcoin, has sparked a discussion about possible consequences for the industry. Understanding the key reasons and current situation is essential for analysts and investors.
Causes of the Sudden Market Decline
The primary cause of the recent downturn was economic turmoil. Inflation in the US rose to 2.8%, exceeding expectations. Former President Donald Trump also announced new tariffs on goods from over 50 countries, raising concerns about a possible combination of rising prices and slower economic growth. Additionally, revised employment data indicated that job growth in the US was significantly weaker than previously reported, undermining investor confidence.
Is the Bull Market for Crypto Over?
Despite the price drop, key indicators suggest that the market maintains its strong position. The ME Futures Premium is holding above 8% for both Bitcoin and Ethereum, indicating ongoing trading activity from hedge funds. Stability in funding rates and a lack of significant liquidations signal no major panic among larger players. The global M2 money supply is also rising, which may position prices for another increase soon.
Institutional Investments Amidst the Decline
Large companies continue to buy cryptocurrency amid the market decline. For instance, Strategy (formerly MicroStrategy) now holds 628,800 BTC after increasing its stake by 20% last quarter. Coinbase has also added 259 BTC to its holdings. BlackRock's ETF has recorded inflows of $87 billion from over 1 million new investors. According to a Deloitte survey, 99% of CFOs at billion-dollar companies expect to use crypto long-term.
July was a strong month for both Bitcoin and Ethereum, but current volatile conditions raise concerns. Key focus should be on the FED’s meeting on August 7 and the CPI data on August 12, which may determine the market's direction.
