• Bitcoin struggles as governments and Mt. Gox clients offload coins

• Ethereum under pressure after ETF launch is delayed

• Bitcoin’s correlation with tech stocks ebbs, weaker dollar aids

Supply overhang rattles Bitcoin

Supply overhang rattles Bitcoin

The crypto market has not been in its best shape lately, with Bitcoin shedding a significant part of its 2024 rally and falling below its 200-day simple moving average (SMA) for the first time since October 2023. Clearly, there has been a supply-demand imbalance as mostly Germany but also the US have been liquidating government-seized coins, while distributions from the defunct Mt. Gox exchange have been exacerbating this phenomenon.

Interestingly, even if the selling pressure proves to be a temporary development, crypto investors have not yet attempted to buy the dip. It’s possible many risk-seeking investors have rebalanced their portfolios towards AI stocks, which have been posting successive record highs, as the crypto space is lacking fresh catalysts.

Bitcoin’s correlation with stocks breaks

The latest crypto selloff has been unfolding in a period when US equity markets are rallying to consecutive higher highs. Traditionally, these two asset classes have exhibited a strong positive correlation, but lately, idiosyncratic risks have been weighing on cryptos.

With the launch of spot-Bitcoin ETFs, markets were anticipating a strengthening correlation between stocks and Bitcoin as the latter would be mostly traded through investment vehicles controlled by Wall Street giants. However, the recent moves should serve as a reminder that the crypto sector is far from being a mature market, thus, it is still characterised by high volatility.

That being said, sector-specific risks might also kick in for stocks, especially with the earnings season just getting underway. This could lead to yet another shift in their correlation with cryptocurrencies.

Ethereum ETF launch delayed

Although the selloff in cryptos is mainly attributed to Bitcoin-specific risks, Ethereum’s outlook has not been any better. The leading altcoin has come under additional selling pressure as the debut of its spot ETFs will come later than initially expected. Investors might be repositioning for a buy-the-rumour sell-the-news type of event, given that the timing of the ETFs’ launch has minimal impact on the coin’s ‘fair’ value.

BTCUSD is held down by 200-day SMA

BTCUSD (Bitcoin) has been experiencing a strong decline since the beginning of June, retreating to its lowest level since February 27. Although the price managed to find its feet and attempted to recoup some losses, the 200-day simple moving average (SMA) has been acting as an impenetrable ceiling.

Should Bitcoin violate that crucial hurdle, immediate resistance could be found at $59,500, a region that acted as strong support in March and April. Higher, attention could shift towards the July resistance of $63,800.

On the flipside, if the 200-day SMA holds its ground, the price could reverse back towards the April bottom of $56,483. Lower, the decline could come to halt at the recent four-month bottom of $53,520.