After months of strong performance, Bitcoin made its first crash landing of the year in May. For the first time, the cryptocurrency closed with a negative monthly performance.
So far, Bitcoin investors have seen a satisfactory 2023. Since the beginning of the year, the price of the No. 1 cryptocurrency grew from 16,540 US dollars (USD) to as high as 30,486 USD. BTC printed this annual high on the price chart on 14 April.
Bitcoin price since the beginning of the year
Most recently, however, Bitcoin switched into correction mode. At the time of writing, one unit of digital gold still costs USD 27,109. In May, in particular, it was constantly on a downward trend. This makes the past month the first this year with a negative performance, as BTC analyst PlanB notes on Twitter.
What happens now?
But the signs are still positive, says BTC-ECHO market expert Stefan LĂŒbeck: âOverarchingly, the upward movement that has been going on since the beginning of the year remains intact.â Whether Bitcoin will continue to follow the long-term trend in June depends, in his opinion, on two factors.
On the one hand, it remains to be seen whether the positive development around the new crypto hub Hong Kong will actually have a positive effect on trading volumes in the coming months. The injection of fresh capital into the crypto market from the Far East could give the cryptocurrency new momentum.
BTC-ECHO market expert Stefan LĂŒbeck The Hong Kong Securities and Futures Commission (SFC) had paved the way for the licensing of crypto exchanges in the special economic zone at the end of May. As of May, exchanges can apply for the trading licence.
According to LĂŒbeck, the other price-determining factor is the global M2 money supply. This is the cash circulating worldwide as well as short-term demand deposits, i.e., Giro money.
If the money supply, i.e. the liquidity in the system, increases, investors are more willing to invest in risk assets such as Bitcoin. According to LĂŒbeck, the decisive factor for this turnaround in monetary policy is above all the economic development.
Consolidation in the summer?
Grigori Akimov, analyst at crypto fund provider F5 Crypto, rather expects a consolidation phase in early summer given the strong performance this year.
Currently, Bitcoin is struggling with a significant macro resistance zone between EUR 27,000 and EUR 30,000. A plausible forecast for June 2023 would be consolidation in a sideways trend between EUR 23,000 and EUR 27,000.
Grigori Akimov, Crypto Analyst at F5 Crypto
In addition, Akimov says, it is also summer â which usually means that the (crypto) markets are rather moderate. âSummer is typically a quieter time for the marketsâ. Therefore, the analyst does not expect a sustained upward breakout for the time being.
Inflation in the Eurozone is declining: Good for the Bitcoin price?
Meanwhile, a slight recovery can be reported in inflation. According to the latest figures from Eurostat, the inflation rate within the euro area was only 6.1 per cent in May. This is 0.9 percentage points less than in the previous month.
The restrictive measures of the European Central Bank (ECB) are thus bearing fruit; whether the unexpectedly strong decline in the inflation rate will trigger a turnaround in interest rates, however, is considered unlikely. Market observers rather expect further moderate interest rate hikes in the coming months. After all, the central bank is still miles away from its target inflation of two percent.
On balance, however, falling inflation rates are positive in the context of risk investments.
Mining Difficulty and Hashrate
Fundamentally, however, everything is fine with Bitcoin. If we look at the hashrate, for example, we can see positive market sentiment on the part of miners. After all, the hashrate has been showing enormous growth for months. The cumulative computing power in the BTC network is currently 366 exahashes per second (EH/S). By comparison, the value was 241 EH/s as recently as January.
On the one hand, a rising hashrate leads to a more secure Bitcoin network, as attacks such as 51 per cent attacks become less likely. On the other hand, minersâ investments also point to positive price forecasts for companies competing for market share in anticipation of the upcoming bitcoin halving.
If the Fed, ECB and co. return to a policy of monetary easing in the wake of ongoing economic problems and increase the amount of fiat money in circulation again, institutional investors will once again put more of their money into risky investment sectors such as cryptospace.
