Bitcoin (BTC) is experiencing a 7.0% retreat
this week, with prices dropping to $66,000 per coin and hitting a low of
$64,498, the lowest in the past 10 days. The deteriorating crypto market is
attributed to rising yields on the American debt market, which have been
spurred by higher-than-expected PMI and GDP estimates in the United States.
Bets on interest rate cuts by the Federal Reserve (Fed) in June have decreased
to 56.3% from 66.0%, while U.S. 10-year Treasuries yields have surged to 4.40%,
the highest since November 28, 2023. This significant rise in yields has
contributed to a 1.2% decline in the S&P 500 broad market index, dragging
down Bitcoin prices along with it.
Although the increase in borrowing costs in
the U.S. debt market serves as a formal reason for the decline, there are
additional negative factors at play. Capital inflows into Bitcoin ETFs are deteriorating.
The ProShares Bitcoin Strategy ETF (BITO) lost $40.2 million last week. IBIT from
BlackRock and FBTC from Fidelity received $540.3 and $560.0 respectively, while
GBTC from Grayscale lost $1.0 billion. So, overall net inflows are at a very
low level. Thus, the increase of borrowing costs in the U.S. debt market could
serve as a rather formal reason for a decline. This week the situation has
slightly improved, but not enough to reverse negative market sentiment.
Furthermore, daily trading volume for spot
Bitcoin ETFs has decreased by 36% to $5.4 billion, mirroring a similar trend on
crypto exchanges. The significant drop in trading volume on platforms like
South Korean Upbit, which saw a 75.0% decline to $3.79 billion, suggests a
depletion of liquidity in the market. The launch of Goldman Sachs' UltraShort
Bitcoin ETF (SBIT) further indicates a shift in sentiment, as investors seek
hedge instruments or speculative tools amidst market uncertainty.
Interestingly, investors are showing
heightened interest in alternative assets like cocoa, with prices surging by
more than 100% this year compared to Bitcoin's 55.0% increase. When considering
a broader perspective, cocoa prices have risen by more than 200%, outpacing
Bitcoin's 136% gain. This divergence may reflect a lower focus on the crypto
market, leading to decreased capital inflows, reduced trading activity, and a
quest for alternative investment opportunities. Additionally, the ongoing
development of infrastructure for shorting the crypto market underscores the
evolving dynamics within the industry.