On June 4, 2021, art will be displayed during the Bitcoin 2021 Convention at the Mana Convention Center in Miami. Getty Images | Marco Bello | AFP Cryptocurrencies are in a slump this summer as they work their way through a two-month correction period following a slew of unfavorable news. According to data from crypto market data company CryptoCompare, trading volumes at the top exchanges, including Coinbase, Kraken, Binance, and Bitstamp, plummeted by more than 40% in June, owing to lower prices and lower volatility. According to the research, the price of bitcoin fell to a monthly low of $28,908 in June, and concluded the month down 6%. On June 22, the daily volume maximum was $138.2 billion, down 42.3 percent from the intra-month high in May. According to Reuters, which first reported on the findings on Monday, China was cited as a major factor. China’s newest crackdown on the business, which has been ongoing for years, has had a greater impact than ever before. However, investors and professionals in the cryptocurrency ecosystem believe bitcoin and other cryptocurrencies will continue to rise in value over time. “The Chinese crackdown has instilled uncertainty in markets,” said Teddy Vallee, chief investment officer of Pervalle Global. “Because the digital asset ecosystem was punched in the face, it is now battling on the ropes rather than in the ring. When there are huge sell-offs, participants are typically terrified and withdraw their chips.” Vallee also stated that he is still not witnessing substantial movements off exchanges, that funding rates are still negative, and that the number of new wallets is decreasing. Causes of the sluggishness China halted cryptocurrency trading at the end of June as it prepared to introduce its own state-backed digital currency. This resulted in the closure of mining operations in a number of provinces that had previously housed 50 percent to 60 percent of all bitcoin mining power. Miners were not transacting as much with the bitcoin they produced when they left China, according to Gabor Gurbacs, director of digital assets strategy at VanEck. Additionally, according to Ben Forman, managing partner at alternative investment firm ParaFi Capital, the emerging ESG narrative around bitcoin’s proof-of-work consensus mechanism and negative regulatory undertones from the Financial Action Task Force, the intergovernmental anti-money laundering watchdog, have dragged the mood down even further in the markets. Environmental, social, and governance factors are referred to as ESG. “Sentiment plunged to single-digit levels on a scale of 1 to 150 once these tales began to pervade the market in May,” said Nick Mancini, research analyst for crypto sentiment analytics platform Trade the Chain. “As a result, bitcoin’s trading volume has dropped by nearly half since its high, and it’s down even more than 32% from its June average.” Chain Trading Gurbacs also said that, even in equities, summer can be a time of lesser volume, and that investors may still be feeling the effects of the crypto market’s massive losses this year. He also mentioned that the price of bitcoin has climbed as high as $60,000 and the price of ether has climbed as high as $4,000 this year, attracting a lot of fresh attention and investors into cryptocurrency who haven’t yet experienced a bitcoin bear market. “The rock pools are starting to bore people,” Gurbacs added. “A lot of people invested upwards and a lot of new people invested at the top, and they lost money,” he added as cryptocurrencies hit all-time highs this year. “With half of the market gone, we can’t expect the same volumes when the market is essentially a lot of newcomers who were terrified.” Volumes are still higher than they were a year ago. Despite the steep decline in trade volume, Clara Medalie, research lead at crypto market data firm Kaiko, says it’s still substantially greater than last year. “While volumes fell in June on almost every exchange, overall volumes are still orders of magnitude more than they were a year ago today,” Medalie told CNBC. “June volume is still among the top five months in terms of volume ever recorded,” she said. “While the decrease was significant when compared to May, the comparison is unfair because May had the greatest volumes ever recorded due to historic liquidation activities. Volumes have returned to early 2021 levels, but they are still tremendous when compared to 2020 levels.” Mancini of Trade the Chain believes that the crypto market is still more optimistic than bearish, and that volatility and volume will return to past highs. “The Bollinger Bands on the bitcoin daily candle are presently tightening very similarly to what we witnessed in July 2020, which culminated in tremendous bullish market activity,” he stated. “We believe bitcoin is poised for growth rather than diminishing, with more institutions officially declaring crypto trading and research sections, sovereign governments accepting bitcoin as currency, and miners shifting to more democratic nations.” According to Trade the Chain, bitcoin derivatives peaked at $230 billion in May before falling to $45 billion on July 9. “The one bright spot in the derivatives markets is that the bitcoin options put to call ratio has dropped to 0.60 from a high of 0.65 in June, indicating that traders are becoming less negative as the months pass,” Mancini added./n
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