Bitcoin fell below $60,000 in less than a week from its $70,000 weekly peak. The constantly volatile cryptocurrency market took another hit this week from various directions, but most may actually be connected to the United States. Let’s examine the possible reasons for Bitcoin’s $10,000 drop from Monday to Sunday morning.
Current State of the Crypto Market
The week started on a high note as Bitcoin’s price rose by $3,000 on Monday, reaching $70,000 for the first time since early June. This came just a day or two after Donald Trump appeared at the 2024 Bitcoin conference in Nashville. There, he made some big promises, such as firing SEC Chairman Gary Gensler on his first day in office.
Trump’s now pro-Bitcoin stance had a positive effect on the entire market, but it was short-lived. Later on Monday, Bitcoin fell by $4,000 and continued its decline throughout the week. In fact, the cryptocurrency dropped to $62,200 on Friday evening after the U.S. released its July employment report.
With the unemployment rate soaring to 4.3%, the highest level since October 2021, it suggested that the world’s largest economy might be in a more concerning state than many had thought. Wall Street reacted with sudden price drops, and the crypto market did the same.
Macroeconomic Data
The Bank of England lowered interest rates by 0.25 basis points for the first time since the pandemic earlier this week. Thus, the Bank of England joined other major institutions like the ECB and the Bank of Canada in lowering rates.
However, the U.S. Federal Reserve continues to delay such a move, keeping rates at a decades-high range of 5.25% to 5.50%. Democratic Senator Elizabeth Warren continues to pressure Fed Chairman Jerome Powell to cancel his holiday plans and lower rates now instead of waiting for September, when most experts believe a drop will occur.
Lower interest rates are generally perceived as bullish for risky assets like crypto because they make borrowing cheaper. Therefore, this uncertainty about the Fed’s next move could be one of the reasons some investors have decided to exit the crypto market, at least for now.
Continued Exits from ETF Funds
The two reasons mentioned above are actually strongly related to this. Reports of a weak U.S. economy and uncertainty around the Federal Reserve’s actions have scared some investors, especially larger ones who tend to use ETF funds for crypto investments.
As reported on Saturday, exits from spot Bitcoin ETF funds surged to around $240 million on Friday, the highest in nearly three months. Withdrawals from Ethereum ETF funds remained in the red for the second consecutive week. ETF flows have proven in the past to have an immediate impact on Bitcoin’s price, especially exits. As a result, they could be a significant reason behind the asset’s drop to $60,000 and below.
