Markets
Cryptocurrency market turns green, downside risk remains high
The cryptocurrency industry has been showing signs of turmoil due to the Bitcoin selloff in Germany and concerns surrounding significant liquidations by creditors of the now-defunct Mt. Gox exchange.
However, beyond these oversupply, there is a promising future driven by sustained risk-taking in well-established markets and advantageous macroeconomic circumstances.
Investors tend to be more willing to put money into riskier, growth-sensitive assets like Bitcoin and stocks during periods of global economic expansion.
Increased risk appetite
US-based spot Bitcoin exchange-traded funds (ETFs) saw their biggest day of net inflows in over a month amid the crypto market crash. The 11 funds generated $295 million in revenue on July 8.
For the first time in the previous three trading weeks, net inflows for all funds were positive on the day. $187.2 million was the largest daily inflow into BlackRock’s iShares Bitcoin Trust ETF. Fidelity’s Wise Origin Bitcoin Fund, which saw gains of $61.5 million, came in second.
News continues after this announcement
News continues after this announcement
Meanwhile, the Grayscale Bitcoin Trust saw $25.1 million in inflows in a rare day of favorable market activity. Today is the largest day of inflows since June 5, when the ETF received more than $488 million in new capital.
More than 26,200 BTC have been sent by the German government to exchanges and market makers so far. Data from Arkham Intelligence indicates that at the time of writing, there are still 27,460 BTC, or $1.6 billion, in reserve.
Bitcoin has fallen nearly 17% to $57,200 in a month, triggering a chain reaction in meme coins, digital assets purportedly connected to artificial intelligence (AI) and other volatile areas of the cryptocurrency market. The German government currently holds $1.57 billion in Bitcoin.
Meanwhile, as now-defunct Japanese cryptocurrency exchange Mt. Gox begins compensating creditors who lost their money in a 2014 breach, concerns are growing that $8.5 billion worth of Bitcoin could enter the market in the coming months. However, according to some analysts, concerns about Mt. Gox’s Bitcoin sales may be overblown.
Over the past two weeks of trading, Bitcoin’s price has plummeted; on July 5, it fell to $53,600, marking the first time since February that the commodity has traded below $54,000.
Bitcoin Perspectives
The overall view is still more bearish, with the possibility of another decline before consolidation for a few months and then another rally in Q4.
At the time of writing, Bitcoin had recovered from a low of $54,300 to $57,200 during Monday morning’s Asian trading session.
On the downside, there is support at $51,500, but an upward move would have to overcome resistance levels at $60,000.
Additionally, the upcoming US inflation data could worsen the situation for already erratic cryptocurrency markets.