The overall cryptocurrency market capitalization plunged 3.9% between June 20 and June 21, approaching $2.34 trillion, its lowest level in five weeks. The decline affected all the top 10 coins, with Bitcoin (BTC) down 4.2%, Ether (ETH) down 4%, and BNB (BNB) experiencing a 4.2% correction. Despite recovering some of the intraday losses, the market remains in a bearish mood.
Selling pressure in Germany was more than offset by MicroStrategy’s BTC purchases.
Some analysts have suggested that the German government’s massive sale of Bitcoin caused the cryptocurrency market slump. But this explanation ignores the fact that traditional financial investors reacted to unfavorable macroeconomic data. Traders are concerned that the stock market has peaked and the U.S. financial situation is weakening.
According to on-chain cryptocurrency analytics firm Arkham, a wallet linked to the German government transferred 6,500 BTC, worth $425 million at the time, to the exchange on June 19. Arkham claims the wallet contained nearly 50,000 bitcoins believed to have been seized from Movie2k, an illegal movie website that operated in 2013. Evidence shows that the company sent BTC to Kraken, Bitstamp, and Coinbase, leaving little doubt as to where it came from and where it came from. Effective selling.
However, this theory is flawed because US-based business intelligence company MicroStrategy disclosed on June 20 that it had purchased an additional 11,931 BTC for $786 million. MicroStrategy’s buying thus covered selling pressure, including a two-day net outflow of $292 million from the U.S. spot Bitcoin exchange-traded fund.
Considering that no other regulatory changes or events have been able to negatively impact the sentiment of cryptocurrency investors over the past few days, the focus should be on the traditional financial industry, especially macroeconomic data. Despite the short-term correlation between the S&P 500 index and the cryptocurrency sector, traders typically exit risk positions during periods of uncertainty.
US futures and options expiration and worsening global macroeconomic conditions
According to Bloomberg, the U.S. stock market is experiencing a ‘triple witching’ phenomenon that occurs every quarter when derivatives contracts linked to stocks, index options, futures, etc. expire. A total of $5.5 trillion in Treasury bonds are scheduled to expire on June 21, and with the S&P 500 nearing all-time highs, investors are fearful that weak macroeconomic data means the risk of a recession is higher.
Existing home sales in the U.S. fell for the third straight month in May, while manufacturing and services PMI figures in France and Germany came in below expectations. Similarly, the UK’s PMI found that private sector companies reported slower-than-expected growth. Lastly, Japan’s inflation in May was 2.8%, up from 2.5% in April.
Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, said the U.S. debt limit, which has been suspended by Congress until early 2025, is expected to create gridlock and potentially trigger another sovereign downgrade. “Five-year credit default swaps (CDS) on U.S. Treasury bonds are a cause for concern,” Goldberg said.
Related: Why did Bitcoin price fall today?
The worsening sentiment was further strengthened after retail data provider Syntun reported its first decline in sales in eight years at China’s annual mid-year e-commerce festival. The event marks the founding anniversary of JD.com, a Chinese giant that is the second-largest in the region by annual revenue, according to CNBC. Total sales in 2024 will be $102.3 billion, a 7% decrease compared to 2023.
In this scenario, the US Dollar Strength Index (DXY) rose to its highest level in 50 days at 105.85. This suggests investors are moving away from the euro, British pound, Swiss franc and similar currencies. While the S&P 500 index was flat on June 21, traders viewed Bitcoin’s 52% rise year-to-date in 2024 as a reason to profit and reduce exposure amid macroeconomic uncertainty.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.