Key Points
- Bitcoin’s price has dropped below the $60,000 mark, diverging from the equities market.
- Bitcoin miners may increase selling pressure due to lower network fees and reduced rewards for mining.
Despite the S&P 500 consistently reaching new all-time highs, Bitcoin’s price has been showing a different trend. In the past day alone, Bitcoin’s price has decreased by 4.56%, falling below the important $60,000 threshold.
At the time of writing, Bitcoin is valued at $59,892, with a market cap of $1.181 trillion. Over the last few weeks, Bitcoin has been moving sideways, showing a stark contrast to the equities market.
Federal Reserve’s Influence on Markets
Jerome Powell, the Chairman of the Federal Reserve, recently made significant remarks regarding inflation. He stated that the central bank has made substantial progress on inflation, but he added that they want to ensure inflation is sustainably moving towards 2% before they start to reduce or loosen policy.
These comments were made at a central banking forum in Sintra, Portugal. The Federal Reserve’s dovish stance seems to have had an impact on equity markets, with futures rising following this week’s inflation statement. Dow Jones Industrial Average futures increased by 0.073%, and S&P 500 futures edged up by 0.018% in pre-market trading.
As of Tuesday’s close, the S&P 500 was trading at 5,509.01, up by 0.6% and hitting a new all-time high. In a similar vein, the Dow Jones Industrial Average rose by 0.4% closing at 39,331.85 while the Nasdaq composite added 0.8% to 18,028.76, surpassing its own record from the previous day.
The Commerce Department’s personal consumption expenditures price index, the Federal Reserve’s primary inflation gauge, increased by 2.6% over the past 12 months as of May. This is a steady decline from around 4% a year ago. However, policymakers anticipate that it will not reach the Federal Reserve’s 2% target until 2026.
Bitcoin Miners and Selling Pressure
According to Kaiko Research, Bitcoin’s price may face continued selling pressure from Bitcoin miners due to lower network fees and reduced mining rewards. Kaiko’s data indicates that fees have dropped to an average of $3 to $5, down significantly from around $45 in January.
In April, a code update known as the halving reduced block rewards for transaction processing from 6.25 Bitcoin to 3.125 Bitcoin. This decrease has placed pressure on miners by reducing revenue while expenses such as energy, wages, and rent remain largely unchanged. The decrease in network fees has further impacted revenue.
The report also states that during May, major Bitcoin miners like Marathon Digital sold 390 Bitcoins and plans to sell even more to manage its operations. Therefore, Kaiko suggests that the risk of forced selling from Bitcoin miners will persist in the coming months.
