The premier cryptocurrency has given investors a pleasant surprise. Following its worst month in four years, during which Bitcoin slumped by roughly 20%, the coin is showing its resilience once again.
On the evening of July 1, BTC bounced sharply from a 21-month low around $57,700 and firmly established itself above the psychological $60,000 threshold. Following the flagship’s lead, Ethereum also roared back to life, reclaiming its position near the $1,600 mark.
What triggered this local rally, and what pitfalls still lie ahead for the bulls? Let’s break it down.
Macroeconomic Fog: The Fed Keeps Investors on Their Toes
The price action kicked off immediately following remarks by Fed Chairman Kevin Warsh. The head of the regulator chose to maintain suspense regarding the July interest rate decision, citing a weak economic backdrop, but made one thing crystal clear: it’s too early to relax.
“We are all in the business of price stability—it may not be our only business, but if there’s one common thing I’ve heard over the last couple of days, it’s an openness to AI questions, an openness to productivity questions. But we all looked around and saw that prices are just too high,” Warsh emphasized.
According to FedWatch Tool data, market sentiment is currently split as follows:
- 70.6% of investors believe the interest rate will remain unchanged at the upcoming meeting at the end of July.
- 29.4% of market participants are less optimistic and expect a rate hike.
- By the September Fed meeting, expectations for monetary policy tightening rise to nearly 50%.
Adding fuel to the fire are other headwinds from the traditional market. The 5-year US Treasury yield climbed to 4.22%, gold dropped 12% in just two months, and the US Dollar Index (DXY) closed in on its yearly high. Under these conditions, it becomes significantly harder for capital to flow into high-risk assets.
ETF Diet and a Lull Among Retail Investors
Additional pressure on Bitcoin came from the sentiment surrounding major funds. June was marked by a record net outflow from spot Bitcoin ETFs totaling $4.5 billion—the largest monthly drop since their launch—with the daily streak of withdrawals stretching for 10 consecutive days.
Meanwhile, an unprecedented lull is being observed among retail players. An analyst writing under the pseudonym Darkfost pointed out that inflows from investors with balances of less than 1 BTC on crypto exchanges are at record lows. For instance, on Binance, the average daily retail inflow has plummeted from 2,690 BTC in 2021 to a modest 329 BTC today.
However, the expert sees a silver lining here: retail investors are simply shifting to alternative instruments like exchange-traded funds (ETFs). In the long run, this could strengthen Bitcoin’s position by reducing direct selling pressure on exchanges.
“At the Bottom” Signal: What Do the Metrics Say?
Despite the barrage of negative factors, CryptoQuant analysts advise against panicking and hint at an imminent trend reversal. According to their data, the market has neared a local bottom, as the percentage of UTXO (Unspent Transaction Output) losses has reached a critical 60%.
“An upward trend in this metric means that the share of investors in a loss-making state is increasing. Investor losses are rising to a maximum level. This is a signal that the market is very close to its bottom,” the company concluded.
Having weathered its worst month in 4 years and a barrage of macroeconomic pressure, Bitcoin is finding solid ground once again. How sustainable this rebound will be depends on the coming weeks and the Fed’s upcoming decision on interest rates.
