Dumb Money May Cause Bitcoin Price Correction, Here’s Why

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As a seasoned crypto investor with several years of experience in the market, I am closely monitoring the current downward pressure on Bitcoin (BTC). The fact that BTC is trading around $64,000 and remains stagnant amid unfavorable market conditions is concerning. Analysts’ warnings about dumb money entering the market and pushing prices lower have added to my apprehension.

I’m an analyst observing the Bitcoin market, and currently, Bitcoin is experiencing considerable downward pressure with its price hovering around $64,000. The market conditions have been unfavorable, causing Bitcoin to remain stagnant in this range. However, a cause for concern among analysts is the potential influx of less experienced investors, often referred to as ‘dumb money,’ who might enter the market and push the Bitcoin price lower.

Dumb Money Vs BTC

Based on data from IntoTheBlock, approximately 5.45 million Bitcoin addresses hold around 3.03 million coins with prices ranging between $64,300 and $70,800. The substantial presence of Bitcoin at these elevated price levels acts as a considerable barrier to further price increases. If the Bitcoin price declines, it’s possible that these investors or less experienced traders will sell their holdings to minimize losses. This selling pressure could potentially worsen the downward trend.

Dumb Money May Cause Bitcoin Price Correction, Here’s Why

I. In simpler terms, “dumb money” refers to inexperienced or emotional investors who don’t fully understand market trends and may react impulsively, like selling during market downturns. This behavior was observed in Bitcoin when its price dropped below $67,000.

As a researcher studying the cryptocurrency market, I’ve observed an intriguing development regarding dormant Bitcoin wallets. This week, these wallets have shown unexpected activity. The price of Bitcoin dipped below $65,000, and an on-chain analysis revealed that a significant transaction took place: a single wallet transferred 25,000 BTC in six distinct transactions. This revelation has added to the market’s existing anxiety.

As a researcher studying Bitcoin wallet activity, I’ve noticed that the coins in this particular wallet have been held for between 3 to 5 years based on the Spend Output Age Bands data. However, with recent market sentiment turning bearish, it’s possible that the owner of this wallet may be considering selling these coins. The upcoming week is especially crucial for the crypto market as Bitcoin and altcoins face significant selling pressure.

For the past month, Bitcoin has experienced a decrease of 10%, contrasting with altcoins that have plummeted between 20-30%. Furthermore, approximately 104,000 Bitcoin options worth around $6.72 billion are scheduled to expire on June 28, 2024. A put-call ratio of 0.52 and a max pain point at $57,000 indicate that the Bitcoin price is likely to face downward pressure.

What’s Next For Bitcoin Price?

Traders are preparing for two major economic releases next week: the U.S. GDP growth rate data on Thursday and the Fed’s preferred inflation measure, the PCE inflation data, on Friday. These events coincide with a significant Bitcoin options expiry. This confluence of factors could result in heightened market volatility, potentially causing the price of Bitcoin to dip below $60,000 and even reach as low as $57,000.

In the past week, there have been significant outflows from Bitcoin Exchange-Traded Funds (ETFs), surpassing the $500 million mark. Additionally, the German government has transferred a considerable amount of Bitcoin from its reserves to cryptocurrency exchanges, thereby expanding the market supply.

As a researcher studying the Bitcoin market, I’ve observed an intriguing trend: despite the recent selling pressure, over 87% of Bitcoin holders are still in the green. This suggests that there might be more profit-taking to come, which could potentially lead to further price declines. Market analysts predict that Bitcoin’s price consolidation may persist until the end of summer 2024. Consequently, a new bull run could commence around September, with significant activity anticipated around the U.S. elections.

One important aspect to keep an eye on is the upcoming release of the Personal Consumption Expenditures (PCE) price index for May, scheduled for next Friday. A decrease in the core PCE rate prior to this suggests potential downward pressure on the index. Consequently, lackluster retail sales may reinforce this trend, whereas personal income could potentially increase.

A promising indicator is the decrease in Bitcoin holdings on cryptocurrency exchanges. Within the past month, approximately 107,000 Bitcoins have been withdrawn from these platforms, potentially causing a shortage. Furthermore, the Bitcoin halving that occurred recently cut down block rewards to 3.125 BTC, thus reducing the generation of new Bitcoins and maintaining a steady supply level.

In recent times, the Federal Reserve adopted a more aggressive posture regarding interest rate reductions, disregarding softening inflation indicators. Consequently, investors sold approximately $4 billion in Bitcoin, with significant players like whales and miners making the mass exodus. Nonetheless, should the Fed decide to lower rates, certain analysts predict Bitcoin could surge to hit a price tag of $100,000 before year-end.

Dumb Money May Cause Bitcoin Price Correction, Here’s Why

In a recent post on X, Rekt Capital, a well-known crypto analyst, expressed that Bitcoin encountered a firm rejection at its Lower High resistance level the previous day, signaling potential additional declines in the near term. Bitcoin’s downtrend from June is not yet over as it hasn’t shown signs of reversing upward just yet. However, this Lower High resistance line is an essential marker to keep an eye on for a potential break when Bitcoin decides to bounce back positively.

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2024-06-23 11:38