BlackRock analysts warn that an “unprecedented” situation is unfolding…

On Wednesday, Bitcoin briefly fell below the $60,000 mark, and Ethereum briefly fell below the $3,300 mark. Bitcoin prices have struggled over the past month, falling nearly 15% as people worry about a "real correction."

Cryptocurrency markets are currently grappling with multiple pressures, especially expectations that the defunct Mt. Gox exchange may begin to reimburse users of their bitcoins. Bitcoin hit an all-time high of more than $73,700 in March but has since traded between about $59,000 and $72,000.

Market concerns over this issue were highlighted by Singapore-based cryptocurrency trading firm QCP Capital, which stressed that the backlog of up to 140,000 bitcoins should continue to weigh on the market, especially since the exact repayment schedule is not yet known.

Meanwhile, adding to the negative sentiment in the market, spot Bitcoin ETFs experienced a net outflow of $13.6 million on July 2, following several days of net inflows, according to data from SoSo Value.

Additionally, the higher long-term interest rate environment triggered warnings from analysts at BlackRock, the world’s largest asset manager, who said an “unprecedented” situation is unfolding that could hit bitcoin prices and crypto markets.

Still optimistic in the long term?

Tom Lee, managing partner and head of research at Fundstrat Global Advisors, gave a longer-term view of the current market dynamics in an interview. He said, "Bitcoin may have been struggling since Mt. Gox began to repay in July, which is a huge pressure in many years, but if I knew when I invested in cryptocurrencies that one of the biggest overhangs would disappear in July, it would be reasonable to expect a strong rebound in the second half of the year."

In addition, a research report released by CCData on Tuesday showed that Bitcoin has not yet reached the top of the current appreciation cycle and may hit a record high this year.

A bitcoin "cycle" is a period when the digital currency rises to record highs before falling again into a bear market or "crypto winter." Since its launch, bitcoin has completed three cycles, all centered around an event known as a halving, in which miners' rewards are cut in half, reducing the supply of bitcoins on the market.

Typically, Bitcoin halvings occur a few months before Bitcoin reaches its all-time high for the cycle. However, the current cycle is different. Thanks to the help of spot Bitcoin ETFs, Bitcoin first hit its latest record high, and then the halving event occurred.

However, many in the market still question whether Bitcoin has reached the top of its current cycle.

The CCData report studied the historical price trend of Bitcoin and showed that Bitcoin may still hit a new high. The company said that historical trends show that after the Bitcoin halving event, there is always a period of price expansion before the Bitcoin price actually reaches the top. "Price expansion period may last from 366 days to 548 days before the top of the cycle is generated."

The last Bitcoin halving took place on April 19 this year. CCData said, "In addition, we observed that trading activity on exchanges declined in the past two months after the halving events in previous cycles, which seems to reflect this cycle. This suggests that the current expansion cycle may further expand until 2025."

The analyst acknowledged that institutional players in the industry have altered Bitcoin’s previous trends in the current cycle, adding that trading activity will likely be low in the third quarter, which in turn could mean more “sideways trading.”

“However, the data and prior trends are strong enough to suggest that any sideways movement is temporary and we could see another breakout above the prior all-time highs before year end,” CCData said.

The upcoming launch of a spot Ethereum ETF in the U.S. and other similar products around the world are “destined to bring additional capital, liquidity, and demand to the asset class,” the firm’s report said.

CCData highlighted another key historical data point that supports its argument, saying that Bitcoin's price appreciation occurs in a short period of time. For example, in the 2012 cycle, 91.4% of Bitcoin's overall price growth from halving to record highs occurred in the four months before the cycle peak. In the 2016 and 2020 cycles, Bitcoin's price growth in the four months before reaching record highs was 78.8% and 71.5%, respectively.

CCData stated that “this parabolic expansion has not materialized in the current cycle.” Other commentators highlighted how Bitcoin’s historical patterns have evolved.

Thomas Perfumo, head of strategy at cryptocurrency exchange Kraken, said: “Historically, Bitcoin has peaked 12 to 18 months after the halving, the last time being in April of this year. We also have not seen volatility reach previous peak highs. Finally, previous market cycle peaks coincided with a series of rapid historical highs, that is, 10 to 20 new highs in 30 days, and we have not triggered any of these signals yet.”