(Kitco News) – It was a positive start to the second half of the year for cryptocurrencies and stocks as asset prices trended higher on Monday after the latest U.S. manufacturing activity data showed the Institute for Supply Management's manufacturing PMI fell further into contraction territory in June, hitting a four-month low.
This helped boost hopes that the Federal Reserve could implement an interest rate policy pivot in September as the economy shows signs of weakening. Investors now await the June jobs report, due Friday, with hopes that it will show further signs of cooling in the labor market that could provide additional support for interest rate cuts.
Stocks opened higher and managed to defend against bearish pressures in the afternoon, leading to positive closes for the S&P, Dow, and Nasdaq, which finished up 0.27%, 0.13%, and 0.83%, respectively.
Data provided by TradingView shows that Bitcoin (BTC) climbed back above support at $62,800 in the morning and hit a daily high of $63,820 in the afternoon, erasing the losses recorded last week.
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $63,232, an increase of 1.79% on the 24-hour chart.
Head- and tailwinds
While the top crypto is showing strength to start the week, analysts at Bitfinex noted that Bitcoin has failed to maintain the positive tone it hit at the start of the year, and in recent weeks, asset-specific factors have added further headwinds to digital asset prices that ended the first half with a whimper.
BTC also decoupled from U.S. equities in June as long-term holders resumed selling while a supply overhang took a toll on the market.
“Price headwinds for Bitcoin in particular has impacted its performance in June, undermined by the policy environment which has led to a dip in volatility,” they said. “BTC has struggled to maintain upward momentum, decoupling from US equities, while long-term Bitcoin holders, who had paused on any selling in early May, have returned.”
“Notwithstanding a decrease in miner sell-offs that would suggest some market stabilization from this cohort, continued high levels of profit realization by long-term holders means the near-term outlook is vulnerable,” they warned.
“In the meantime, an overhang of supply continues to weigh on the market, with selling possible from Mt. Gox depositors and the Bundeskriminalamt, Germany’s Federal Criminal Police Office, who may be tempted to dispose of their recent Bitcoin windfall,” the analysts noted.
As for tailwinds, Bitfinex highlighted that “the Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures Index, came in unchanged in May, suggesting that inflation is now only slightly above the Fed's two percent target.”
“With hopes that this may lead to a rate cut in September, the case for such action was supported by the third estimate for the first quarter of US GDP, which showed that despite a small upward revision, the economy has some weak foundations,” they said. “Additionally, consumer confidence is declining, with the percentage of consumers planning to buy a home low, due to high mortgage rates and limited supply. It is hoped that a rate cut will come soon.”
Returning to the immediate influences on Bitcoin’s price, Bitfinex analysts said that while “profit realization is expected in a bull market, the magnitude” of the recent sales by long-term holders “raises concerns.”
“If long-term holders continue to take profits at current levels (which we believe to be unlikely for an extended period of time), it could exert significant near-term downward pressure on Bitcoin's price, potentially extending the current decline and impacting the bull market in the mid-term,” they warned.
While many have described Bitcoin’s sideways price action over the past four months as “boring,” Ki Young Ju, founder and CEO of cryptocurrency analytics firm CryptoQuant, said less volatile periods in the market are when whales do the most accumulation and Bitcoin is still in a bull cycle.
#Bitcoin market is boring with less volatility.
= Less interest from both buyers and sellers.
= Retail exit liquidity not ready.
= Ideal time for whales to accumulate $BTC.
= We're still in a bull cycle. Boring is an opportunity. pic.twitter.com/zccHAbOOHA— Ki Young Ju (@ki_young_ju) July 1, 2024
Altcoins on the uptrend
Most altcoins in the top 200 followed Bitcoin’s lead higher on Monday, with only a handful of tokens recording losses to start H2 2024.
Daily cryptocurrency market performance. Source: Coin360
LayerZero (LZO) was the top gainer, climbing 15.1% to trade at $3.83, followed by an increase of 14.1% for Bonk (BONK), and a gain of 11.7% for Ethereum Name Service (ENS). Arkham (ARKM) was the biggest loser, falling 8.7%, while Convex Finance (CVX) lost 7.1%, and io.net (IO) declined by 4.4%.
The overall cryptocurrency market cap now stands at $2.32 trillion, and Bitcoin’s dominance rate is 53.5%.
