Bitcoin (BTC) and Ethereum (ETH), along with other cryptocurrencies, have experienced a notable decrease in prices recently. This decrease has been driven by a number of factors, specifically market sentiment, monetary policy actions, and the crypto derivatives market.
Declining Optimism and JP Morgan’s Analysis
JP Morgan has expressed anxiety over the continuous sell-off in Bitcoin as the market remains overbought. Consequently, the optimism that financial institutions have for the possibility of a price hike by the end of the year is seen to be on the decline.
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This sentiment is partly due to the expectations of diminished Bitcoin supply post-halving and the assumption of sustained inflows into spot Bitcoin exchange-traded Funds (ETFs). JP Morgan, on the other hand, observes a decline in these inflows, which points to a change in investor sentiment.
Federal Reserve’s Monetary Policy
The decision of the U.S. Federal Reserve to keep the fed funds rate intact at 5.25%-5.5% is consistent with market expectations. Nonetheless, despite this sturdiness, the Chairman of the Federal Reserve, Jerome Powell, has announced a forecast for three rate cuts this year, with additional cuts forecast for 2025. This ruling has affected the dynamics of the market, as seen in the derivatives market, which has shown an upsurge in large-volume transactions.
A market researcher from GreeksLive, Adam noted that almost 30% of all the option transactions are high-volume transactions where many of the transactions are buying the call options.
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Consequently, the options market for BTC and ETH has shown considerable activity, with an expiry of $2.6 billion worth of options. The result is speculation on the possibility of a new all-time high for BTC prices. This outcome is a conjecture about the likelihood of a new all-time high for Bitcoin prices.
An analyst, Markus Thielen, however, supposes a more conservative position, foreseeing Bitcoin to undergo another correction, to go down as low as $52,000-$54,000. Despite the bearish projection, analysts at Bernstein have increased their Bitcoin year-end target to $90,000 from $80,000, reinforcing the potential of Bitcoin regardless of the current market swing.
Spot Bitcoin ETF Influence and Outlook
The dynamics surrounding spot Bitcoin ETFs have also contributed to the market’s bearish sentiment. For several days now, Bitcoin ETFs have experienced net outflows, with the Grayscale Bitcoin Trust ETF (GBTC) experiencing major outflows that have not been counterbalanced by inflows into other funds, such as the iShares Bitcoin Trust (IBIT).
However, the trend of outflows raises doubts regarding the continued popularity of Bitcoin ETFs despite the overall net inflows they have attracted since their inception.
Read Also: Blackrock, Fidelity Break Record With 49 Straight Days of Inflows
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The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
