[Ark Invest’s Bitcoin Report: Why they have a soft spot for BTC]
Ark Invest's crypto experts Julian Falcioni, David Puell and Dan White assess Bitcoin market behavior and prospects in their latest analysis, exploring the impact of various economic, technical and policy factors on Bitcoin.
Bitcoin has experienced a significant decline of more than 25% since early June and fell below the 200-day moving average (EMA) on July 7, which is generally viewed as a significant bearish signal. However, Bitcoin has shown a strong rebound in recent days, quickly recovering above the 200-day EMA, invalidating the bearish outlook.
An unexpected element of Bitcoin's volatility in June was the German government's sale of approximately 50,000 Bitcoins recovered from illegal streaming site Movie2K. The bitcoins began being gradually sold off on June 19, with the influx of coins into the market driving down prices during the July 4th holiday. Currently, this selling pressure has disappeared.
Despite these challenges, Bitcoin has rebounded by more than 17% in recent days. Ark noted that this rebound was supported by multiple indicators. The difference between the decline in Bitcoin prices and the decline in U.S. ETF assets suggests that Bitcoin is oversold and may be driven by external shocks rather than intrinsic market dynamics.
Short-term holders are realizing losses, as evidenced by the sell-side risk ratio, signaling the end of the short-term market correction. June also saw significant activity from Bitcoin miners, with miner outflows typically signaling a market correction, with such events historically leading to reduced supply and rising prices.
On the overall economic front, U.S. economic data continued to miss expectations, with the Bloomberg U.S. Economic Surprise Index recording its most significant negative deviation in a decade. Still, the Fed maintains a hawkish stance, which could affect investor sentiment and financial market stability.
U.S. corporate profit margins have been falling since peaking in 2021, giving companies less pricing power, prompting widespread price cuts and further dampening the economic outlook.
In the stock market, market capitalization concentration has increased significantly, reaching levels not seen since the Great Depression. This could be an early indicator of a shift in the economic landscape, which historically has typically prompted breakouts in small-cap stocks.
