The cryptocurrency market is highly sensitive to Bitcoin's price changes. The latest drop has caused major declines in altcoins.
Some see this as a chance to buy, while others warn of a market sell-off. Recently, the altcoin market has been more responsive to BTC changes. On Friday, a 2.05% drop in Bitcoin caused major altcoins to fall by 20%.
Bitcoin's influence on the altcoin market
The close link between BTC and altcoins led to a significant reduction in Open Interest from $50.93 billion on Thursday to $46.85 billion by Sunday. This means a staggering $4.21 billion in OI vanished due to Friday's price movements. The market crash on Friday also saw $300 million in positions get liquidated, with $254 million of these losses hitting bullish traders hardest.
Altcoins are undoubtedly taking cues from Bitcoin's movements, so it's important to assess BTC's current state. According to earlier reports from FXStreet, Bitcoin's market structure remains ambiguous in both the short and long term.
On Twitter, crypto analyst Cold Blooded Shiller provided a straightforward analysis of Bitcoin's price direction. He highlighted that Bitcoin remains in an uptrend on both daily and weekly charts.
https://x.com/ColdBloodShill/status/1799558402684723517
To maintain this momentum, BTC needs to surpass $72,000 and establish a new swing high. If it fails to do so, a drop to $67,000 could be likely.
Should Bitcoin dip below $67,000 on the daily chart, the next significant support to watch is $61,000 on the weekly chart. Between these two points, the market lacks a clear direction. If Bitcoin surpasses $72,000, the bullish trend is likely to resume.
Conversely, a drop below $61,000 every week would confirm a bearish market trend.
ETFs boost Bitcoin buying spree
During the initial trading week of June, U.S. Bitcoin ETFs purchased nearly as much Bitcoin as they did throughout May. In the first week alone, U.S. spot Bitcoin ETFs secured an amount equivalent to about two months' worth of newly mined Bitcoin.
According to HODL15Capital, 11 ETFs collectively purchased around 25,729 Bitcoin valued at $69,543 during the trading week from June 3 to 7. This inflow, approximately $1.83 billion, significantly surpassed the 3,150 new BTC mined in the same period.
Remarkably, the Bitcoin acquired in this week almost matched the total for May, which was 29,592 BTC. This recent surge marks the highest week of buying since mid-March when Bitcoin reached its all-time high of $73,679.
Since their launch in January, the 11 ETFs have attracted $15.69 billion in net inflows. This figure notably includes the $17.93 billion in net outflows experienced by Grayscale’s fund. Currently, the total assets under management stand at approximately $61 billion. Bitcoin enthusiasts often refer to the cryptocurrency as “digital gold” due to its limited supply, with only 21 million BTC ever set to be produced.
According to Nate Geraci, president of ETF Store, Bitcoin ETF AUM has reached about 60% of the value of the country's gold ETFs. This is quite remarkable considering Bitcoin ETFs have only been around for five months, while gold ETFs have existed for 20 years.
On June 5, Bitcoin surged to $71,093, fueled by the inflows into U.S. Bitcoin ETFs. This marked the first time Bitcoin went above $71,000 since May 21, as reported by Cointelegraph Markets Pro.
Bitcoin benefits from petrodollar change
On June 9, 2024, the longstanding US-Saudi petrodollar deal came to an end, opening new opportunities for Bitcoin. With Saudi Arabia now able to sell oil using various currencies such as the Chinese RMB, Euros, Yen, and Yuan, as well as potentially digital currencies like Bitcoin, this marks a significant change from the petrodollar system established in 1972. This shift is likely to boost the global move away from relying on the US dollar.
Saudi Arabia has joined a China-led digital currency project called Project mBridge. This trial, which also includes central banks from China, Hong Kong, Thailand, and the UAE, aims to make cross-border transactions easier using central bank digital currencies. It works within the Ethereum Virtual Machine framework.
According to crypto analyst Doctor Profit, the end of the US-Saudi agreement could result in increased USD printing and higher inflation. As inflation reduces the value of fiat currency, investors might shift their focus to Bitcoin due to its limited supply and decentralized system.
https://x.com/DrProfitCrypto/status/1799883054460362923
Doctor Profit anticipates a positive trend for Bitcoin, along with gold, stocks, and real estate, as the US dollar faces inflationary pressures.
As traditional financial systems face growing instability, Bitcoin’s importance as a hedge against inflation is increasing. Its decentralized nature and deflationary characteristics make it appealing as a store of value, offering protection against the devaluation of fiat currencies.