In recent months, the correlation between rising US stocks and Bitcoin (BTC) has shown signs of collapse as the cryptocurrency faces a combination of oversupply and weakened demand that has led to a price drop of over 20% from the June highs above $70,000. largest cryptocurrency on the market.
Bitcoin correlation with Nasdaq 100
According to According to Bloomberg, the 90-day correlation coefficient between Bitcoin and the Nasdaq 100 index fell to 0.21 on Tuesday, marking the lowest level since early May. This decline reflects a drop in correlation of more than 50% in the past two months.
Market experts attribute this disconnect to several “idiosyncratic” supply events impacting Bitcoin. Joshua Lim, co-founder of trading firm Arbelos Markets, explains that the cryptocurrency is struggling with the impact of spot sales of seized BTC in the hands of the German and US governments experienced over the past month, as well as the distribution of funds from the defunct Bitcoin exchange Mt. Gox.
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If reported According to NewsBTC, Bitcoin’s decline since March’s all-time high of $73,700 has been accelerated by the recent process initiated by Mount Gox administrators to return approximately $9 billion in tokens to creditors.
Additionally, German authorities sold more than half of the 50,000 BTC seized from a pirate website in January, adding to last month’s continued selling pressure.
Manuel Villegas, research analyst at Julius Baer, emphasizes that the looming supply surplus is the main factor influencing confidence in the market. Villegas stated:
The excess supply of tokens is expected to hit centralized exchanges in the coming days, likely putting pressure on prices. The impending supply surplus was the most important factor affecting confidence.
Capitulation of miners and declining profits
In addition to these challenges affecting the price of BTC, Bitcoin miners are under pressure sell tokens as a result of declining profitability.
These miners, responsible for powering the Bitcoin blockchain, are dealing with the financial fallout of April Halving eventwhich has reduced the number of new tokens they receive for their mining activities.
In response, some miners are selling some of their BTC supply to offset their fiat-based operating costs. Facts from crypto analytics firm CryptoQuant shows that miner capitulation mirrors December 2022 levels with a hashrate drop of 7.7%, similar to conditions following the FTX collapse.
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According to Bloomberg estimates, the average total production cost for miners is about $54,500. If prices drop significantly below this threshold, miners may have to do so liquidate a number of symbolic holdings to cover operational costs.
Ultimately, the combination of the oversupply of seized coins, the Mt. Gox distribution and selling pressure from miners increases uncertainty for investors, which has further affected BTC’s price recovery.
At the time of writing, BTC has managed to recover the $57,850 level, rising more than 2% in the last 24 hours.
Featured image of DALL-E, chart from TradingView.com