10 Reasons Why Bitcoin Could Fall to $55,000

👇1-10) Based on our trend model, Bitcoin entered a downtrend on June 20. Although not every signal is successful, trend-following funds (CTAs) follow a similar strategy and could pile into short positions. Their position size could even increase, especially with declining or low volatility. Realized volatility is just 30%.

👇2-10) Weekly and monthly reversal indicators signal a broader correction. The weekly RSI peaked in early March and has declined despite Bitcoin holding above $60,000. The monthly Stochastics resembles previous multi-month peaks, such as January 2018 and May 2021.

👇3-10) The Presidential Debate appears to have favored Trump simply because Biden’s performance has started the discussion about replacing him within the Democratic Party. This might have been the strategy, considering how early in the year (even ahead of the Republican National Convention in July) occurred. While Trump is pro-crypto, his winning chances might shrink if he runs against another Democratic Candidate (Gavin Newson). If Trump loses, the Democrats could still restrict crypto adoption, contrary to everybody’s expectations.

👇4-10) For 2024, Wall Street was expected to adopt Bitcoin through ETFs, and Registered Investment Advisors were expected to pitch this ETF to their clients. While we have seen six weeks of solid inflows from early February to mid-March ($12bn), additional inflows have been somewhat muted, rising only by $2.2bn since mid-March. Besides arbitrage funds, demand for ETFs for asset allocation or diversification has been muted.

👇5-10) The Federal Reserve might not cut interest rates this year. Although the economy is weakening, labor market data is still holding up. Inflation is turning out stickier than the Fed projected, and Fed Chair Powell unlikely wants to go down in history as Arthur Burns Number 2, who let inflation run rampant in the 1970s. Powell might want to play it safe, keep rates high(er) for longer, and have his legacy as another Paul Volker who brought inflation back to target.

👇6-10) Q3 (July, August, and September) is the weakest quarter seasonally, with just +5% average returns during the last 13 years. This compares to the better quarters of Q2 (+64%) and Q4 (+62%). Based on the weak seasonals, with Bitcoin declining in August and September, Bitcoin could see a correction in any of the following three months.

👇7-10) Stablecoin, a vital source of liquidity and measure of fiat-to-crypto conversion, has stagnated since the Bitcoin halving in April. Mysteriously, inflows stopped, which could be attributed to the underperformance of altcoins. Unless stablecoin inflows resume (minting), the liquidity pool is not expanding; therefore, crypto traders should not expect prices to rise.

👇8-10) Bitcoin miners could disproportionately sell at the $60,000 level, close to the average miner’s breakeven cost. If Bitcoin trades below this level for longer, miners might be forced to liquidate Bitcoin inventory at a loss. After the Luna/Terra implosion, Bitcoin crashed from $30,000 to $20,000 as miners were forced to liquidate BTC as $30,000 was their average all-in cost. After the halving, this has become $60,000.

👇9-10) Ethereum has outperformed Bitcoin since the SEC indicated ETH ETF approvals were imminent. Historically, crypto has tended to rally into significant events, only to sell off once the event (catalyst) was out of the way. This was true for the Bitcoin Futures launch in December 2017, Coinbase IPO in April 2021, Bitcoin ETFs based on Futures in October 2021, the Bitcoin Spot ETF launch in January 2024 but also around the Ethereum Merge in September 2022, and the Ethereum Dencun upgrade in March 2024.

👇10-10) Ten billion dollars worth of Bitcoin and Ethereum options will expire on June 28, keeping Bitcoin near $60,000 until the expiry. However, as those options expire, Bitcoin will likely move more freely as outstanding options are relatively small for the next expiries, and the delta hedging from market makers is less impactful. This $60,000 might have been defended by those who bought calls during the last few weeks, but once those calls expire on June 28, a new range could be set. This range could lower.