According to CryptoQuant, a South Korea-based on-chain data/analytics provider, three key factors are behind the recent cryptocurrency market declines, as outlined in their analysis published on June 18, 2024. CryptoQuant identifies the first reason as miner capitulation, stating that miner revenues have dropped by 55%, forcing miners to sell more Bitcoin to cover costs. The data provider notes that increased transfers of Bitcoin from miners’ wallets to exchanges often indicate they are selling, which can drive prices down.
CryptoQuant points out that the second factor is the lack of new issuances of stablecoins like USDT and USDC, suggesting that less new money is entering the crypto market, potentially reducing liquidity and increasing price volatility.
The third reason, as per CryptoQuant, is the significant outflows from major spot Bitcoin ETFs, such as the ones from Fidelity and Grayscale, creating selling pressure on Bitcoin, with Fidelity seeing an outflow of over 1,384 BTC on June 17th alone.
CryptoQuant observes that the combination of these factors has led to fear among short-term investors, defined as those holding Bitcoin for less than 155 days, causing them to sell off their holdings due to concerns about further price drops. Despite the current market conditions, CryptoQuant highlights that the average realized price for short-term holders, around $62,400, has historically acted as a strong support level in bull markets.
Furthermore, CryptoQuant notes that historical trends suggest periods of sustained low miner revenues combined with a high hashrate can often indicate a potential market bottom, which may point towards possible stabilization or a market rebound. Looking ahead, CryptoQuant concludes that while current conditions are causing fear and selling among short-term investors, the strong support level of around $62,400 for short-term holders’ average realized price could help stabilize prices in the near term. However, the data provider emphasizes that new inflows, especially from stablecoins, and reduced selling pressure from miners and ETFs will be critical for a sustainable recovery.
At the time of writing, Bitcoin is trading at around $65,335, down 0.5% in the past 24-hour period.
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