3 reasons why the price of Bitcoin (BTC) decreased today
After flirting with the $68,000 level on July 22, Bitcoin (BTC) faced a 6% correction in three days, erasing the gains from the previous week. In terms of momentum, there is a positive indication that the $64,000 support is holding firm.
Buyers moved in to defend Bitcoin's market capitalization of $1.25 trillion, slightly higher than the United Kingdom's British pound, which is worth $1.15 trillion. Still, Bitcoin bears have macroeconomic data on their side, at least in the short term.
The decline in the price of Bitcoin coincides with the fall of the US stock market
Bitcoin's price decline coincides with the movement of Nasdaq index futures, which experienced a 4.9% correction between July 23 and July 24. Traders are now questioning whether the drivers behind the stock market, especially tech names, will confirm its correlation with the cryptocurrency market. If investors' concerns stem mostly from fears of a recession, Bitcoin's long-term appeal could create a buying opportunity.
Semiconductor stocks and those related to artificial intelligence infrastructure (AI) led the movement, with Crowdstrike ( CRWD ) down 25.5% for the week, Super Microcomputer ( SMCI ) down 12.6%, GlobalFoundries ( GFS ) down 12.2%, NXP Semiconductors ( NXPI ) down 10. .8%, and Intel Corp ( INTC ) was down 10.5%. The market seems particularly concerned about the demand outlook for AI, noting how the investment in the sector has not yielded profitability.
UBS Global Research's Stephen Ju warned investors that the benefits of AI investments in Google's cloud platform are “difficult to identify” and should not show up on the revenue line before mid-2025. In the second quarter, Google's parent company reported spending $2.2 billion on building AI models. So, according to Yahoo Finance, they are questioning whether Ju's investment returns will drop because the company will require significant capital expenditures for another two years.
Strong macroeconomic data and a court case against Bitfinex
Recent macroeconomic data has contributed to the upturn in investor sentiment. The US economy grew at an annualized rate of 2.8% in the second quarter, above the market consensus of 1.9%. Additionally, ongoing jobless claims, which measure the number of people receiving benefits in the US after the first week of aid, fell on a seasonally adjusted basis. This indicator is typically used as a proxy for hiring, a more forward-looking measure.
Recent economic indicators point to the success of the US Federal Reserve's (Fed) strategy to curb inflation without triggering a recession. The U.S. central bank has kept overnight interest rates unchanged at 5.25%-5.50% through 2023, but analysts expect a two- to three-fold cut by the end of 2024.
This data is somewhat negative for Bitcoin, part of its appeal is as a hedge against inflation, the low value of the US dollar and reduced investor confidence in US Treasury securities. In other words, a strong economy makes alternative assets less attractive, regardless of the stock market's expectations for corporate earnings.
Related: Crypto Has More Potential Than Stocks, Real Estate – Kraken Survey
Bitcoin investors are concerned about the civil litigation against Bitfinex exchange and Tether company. The U.S. District Court for the Southern District of New York has allowed a class-action complaint alleging fraudulent issuance of unbacked Tether (USDT) for certain cryptocurrencies to proceed to discovery. The court released the revised document with new updates on July 24.
It is important to note that this is a civil case, and the claims have not yet been proven in court. Essentially, Bitfinex and Tether will eventually have to pay fines and adjust some of their practices, but this process could take years to fully resolve. Therefore, even if the result is negative, there is nothing in this case that can cause immediate price pressure on Bitcoin.
Bitcoin's recent underperformance may be due to strong macroeconomic data and investor fears of a bubble due to artificial intelligence hype.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
