Bitcoin (BTC) price: Why is it stagnant around $64,600?

TLDR

Why the stock market rebound failed to drive Bitcoin

The Standard & Poor's 500 Index up 3.12% this month, increasing its market value by approximately US$2.1 trillion, while Bitcoin only rose 2%, and its price hovered around US$64,600.

Analysts pointed out that this round of stock market rebound was mainly driven by artificial intelligence and semiconductor stocks, and Bitcoin has little direct exposure in these areas.

A cold wallet hardware vulnerability has resulted in the theft of approximately US$120 million, putting additional pressure on market sentiment.

As bond yields rise and capital flows from the stablecoin market to U.S. Treasury bonds, the supply of stablecoin is shrinking.

Markus Thielen of 10x Research said traders are holding their currency and waiting for the October lows associated with the four-year halving cycle to emerge.

Why the stock market rebound has not benefited Bitcoin

Since the impact of the COVID-19 epidemic in 2020, Bitcoin has usually kept pace with the stock market trend. But the difference in performance between the two this month is unusual.

Adam Haeems, head of asset management at Tesseract Group, said that this round of stock market gains has been concentrated in areas that Bitcoin has failed to reach. "Part of the reason is that the stock market's gains are driven by sectors to which Bitcoin has little direct exposure, especially artificial intelligence and semiconductor stocks," he said.

Paul Howard of Wincent holds a similar view. Money pouring into artificial intelligence and ultra-large-cap stocks does not flow into the cryptocurrency market as naturally as the widespread shift in risk appetite.

Even macro good news is transmitted more slowly to Bitcoin. Falling oil prices and hopes for smooth shipping in the Strait of Hormuz have benefited both markets, but stocks responded more quickly. "The stock market benefits immediately by reducing business costs. For Bitcoin, the impact is transmitted through inflation expectations to Federal Reserve policy,"Haeems explained.

Cryptocurrencies themselves also face a series of problems. The analyst account usethebitcoin reported this week that a cold wallet hardware vulnerability has stolen approximately $120 million from affected wallets, a number that continues to climb as researchers discover more affected addresses.

Attackers have reportedly stolen $88.6 million from cold wallets in three waves, with the latest wave targeting wallets with smaller balances.

A firmware vulnerability in March 2021 caused mnemonic words generated by affected devices to be much less random than expected.

According to reports, a strategy has been selling Bitcoin for three consecutive months. Haeems said that while each event alone did not trigger a credit crisis, they together limited Bitcoin's upside.

Rising bond yields are also quietly drawing capital away. USDT supply has dropped from US$190 billion in April to US$183 billion currently, and USDC has also dropped from US$79.5 billion to US$72 billion. "Given that real U.S. bond yields are at their highest levels since 2008, capital is being rewarded by staying outside the cryptocurrency market,"Haeems said.

Half-cycle theory

Markus Thielen of 10x Research offers another explanation. Traders generally believe that Bitcoin's four-year cycle heralds a bottom in early October.

"Bitcoin holders suddenly collectively accepted the four-year cycle theory... so they were all waiting on the sidelines,"Thielen said, calling it a reversal of last year's scorn on the theory.

He believes that despite the Fed's hawkish stance, Bitcoin's refusal to fall further is in itself a signal that traders are taking lightly positions.

The spot Bitcoin ETF rebounded to a weekly net inflow of US$626 million after an outflow of US$61.53 million, its strongest performance since early May. Vikram Subburaj, CEO of Giotttus, said that before characterizing this trend as a reversal, it is necessary to observe more trading days of consecutive net inflows and focus on support levels around $63,000 to $63,400.

Wintermute believes that ETF buying may stem from arbitrage rather than firm bullish behavior. Confirming the daily close above US$66,200 to US$66,800 remains a necessary condition to open the path to US$72,000 to US$74,000.