Bitcoin under threat: Analysts warn of possible drop to $50,000
Despite a recent bounce from the $60,000 zone and a return above $65,000, it is too early for the market to relax. My analysis of the current situation, supported by data from leading market makers, indicates that Bitcoin (BTC) could face a new wave of sell-offs, down to levels near $50,000. An attractive risk-reward ratio in the long term does not mean the bottom has already been reached.
What triggered the bounce?
The past week broke a prolonged four-week series of declines. This was driven by two key factors that, for the first time in a long while, worked in unison.
The first factor was the May US inflation data. The annual Consumer Price Index (CPI) came in at 4.2%, marking a high since April 2023. However, the key point was that the figure matched expectations rather than exceeding them. Debt market participants, who had feared higher numbers, breathed a sigh of relief. Additionally, core inflation slowed to 2.9%, signaling that the peak of the energy impulse has passed rather than accelerating further.
The second and more significant factor was the de-escalation of the geopolitical conflict between the US and Iran. After more than 100 days of confrontation, the parties announced a deal that includes opening the Strait of Hormuz and lifting the naval blockade. Formal signing is scheduled for June 19 in Switzerland. Against this backdrop, Brent crude oil collapsed from levels above $110 to above $80 over the past month, losing 6.6% in just the past week.
The reduction in the geopolitical risk premium pulled down the dollar and government bond yields. Cheaper oil directly improves the inflation outlook. Thus, the CPI data and the cessation of the conflict this week did not cancel each other out but rather reinforced one another. The nearest catalyst will now be the first Federal Reserve meeting under Kevin Warsh's leadership on June 17.
Why I don't believe the bottom has been reached
The main question now is when the market will turn, and the answer lies in liquidity. Bitcoin remains a macro asset that grows on excess liquidity flowing through three channels: stablecoins, exchange-traded funds (ETFs), and publicly traded crypto-holding companies (DAT). None of these channels show a reversal yet.
Assets under management of DAT companies have shrunk from approximately $220 billion to $140 billion, and new capital raising outside of Strategy, Bitmine, and Strive has virtually ceased. Exchange-traded funds are experiencing their longest series of outflows since launch, while inflows into stablecoins are following the same downward trajectory.
The last cycle showed us that real growth began with ETF approval and subsequent capital inflows. Currently, institutions remain on the sidelines, while retail investors are busy trading stocks and leveraged funds. Until there is a reversal in capital flows, declaring that the bottom has been reached is premature.
My recommendation: watch capital flows, not price or headlines. The risk-reward ratio around the low $60,000s looks attractive in the long term, and each sell-off leaves an increasingly resilient holder base. Nevertheless, I do not rule out that Bitcoin could move into the $50,000 zone before the situation improves. This is not panic, but a rational assessment of the current macroeconomic and liquidity environment.