Bitcoin has brought some of its excellent volatility to bear. The price sank from a multi-week high of $70,000 to under $60,000 in less than a week. This abrupt decline has puzzled cryptoinvestors and makers of all sorts for explanations. While the cryptocurrency market is affected by a variety of factors, the USA has been especially important in terms of economic indicators and news at key points during this period. Here I explain why Bitcoin tumbled by $10,000 recently.
1. The weak US economy.
Bitcoin began the week auspiciously, rising $3,000 on Monday to reach $70,000 for the first time since early June. That surge was heightened by former President Donald Trump’s appearance at Sunday’s 2024 BTC conference in Nashville. He supported Bitcoin and made a variety of predictions, including potentially sacking SEC Chairman Gary Gensler. He laid eggs that attracted the market’s approval, at least initially.
But the good news was brief. Later on Monday, Bitcoin’s price started shooting downward, shedding $4,000, and the fall continued into the week. It was made worse on Friday when the US released its jobs report for July. This report stated an unemployment rate of 4.3%, the highest figure since October 2021, and presages possible economic difficulties to come.
Wall Street’s reaction came quickly across different markets, with prices falling, including cryptocurrencies. Because the crypto market is accessible 24/7, this continued into the weekend. Bitcoin hit a three-week low just below $60,000. The weak jobs report, indicating what could be a fragile economy, was major reason for this decline, as people didn’t want to hold volatile assets like Bitcoin.
2. Future Moves of Fed
The impending decision on interest rates by US Federal Reserve is one more significant factor that relates to our economy. Recently, the Bank of England cut interest rates by 0.25 basis points. This was followed by similar moves from the European Central Bank and the Bank of Canada. But the US Federal Reserve is bucking the trend, keeping its rates at a multi-decade high of 5.25% to 5.50%
Pressure has been piled onto the market because of uncertainty surrounding the Fed’s next move. Moreover, the Director of the Arms Control Group and Senator Elizabeth Warren have given a public shout to Fed Chair Jerome Powell, insisting he make the cut straightaway instead of waiting for September, as many analysts expect interest rates could begin falling more than 0.25 bps per month after that. With lower interest rates, easier access to credit, and more opportunities for borrowing, cryptocurrencies such as `cash left in the bank’ can be seen as markets’ cheerleaders shouting themselves. Well, not everyone is so sure how much value there is to `Killer Jewels’.
3. ETF outflows
The final piece of this puzzle is dramatic cashing out money from Bitcoin ETFs, which is highly seasonal overall but falls somewhat in line with traditional market patterns. On Saturday, reports showed that spot Bitcoin ETFs suffered the highest outflows on record last Friday, reaching $240 million. This was over three years ago now and things moved downward again even after rebounding somewhat with recent news from China. The same pattern could be observed for Ethereum ETFs, which still saw net withdrawals two weeks in a row.ETC coins may then carry some negative connotation as funds steadily flow out for what seems like a reasonable amount of time The end result is that ETF flows have often affected the market price of Bitcoin, especially where there were large outflows. Because the US economy is weak and the Fed’s next move uncertain, big investors using ETFs to get exposure have likely been spooked into redeploying wider funds. As a result, these outflows have played a significant part in pulling Bitcoin’s price down to and below $60,000.
Conclusion
Bitcoin’s recent $10,000 drop may be put down to bad looks out of the United States. The US jobs report was weaker than expected, but there are still concerns about what the Fed will say concerning interest rates, and sudden outflows from large ETFs have also been causing everything to slide downhill all at once. Although the cryptocurrency market is in flux and constantly changing, knowing these small tips can make big differences for investors playing in such a turbulent field.