On the Margin Newsletter: How low BTC's price might go after Monday’s dip

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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what we are digging into on this (glorious?) Monday:

BTC’s price plummeted to $60,000. How much further down could it go?
The economic data to watch for ahead of the July 4 week.
We’re in the US spot ETH ETF homestretch, fund firm filings show.

How low can you go?

No, we didn’t just pull out the limbo stick at a beginning-of-summer celebration. Nor are the voices of Flo Rida and T-Pain blaring out of a boombox circa 2008.

It’s a less fun type of low, most would agree. We’re talking about the price of bitcoin, which continued its sell-off today.

BTC dropped to about $60,000 around 1 pm ET Monday — a roughly 5% drop from 24 hours prior.

Near-term catalysts for a bull trend renewal appear few and far between, some industry analysts and execs say.

After all, Mt. Gox repayments — in bitcoin and bitcoin cash — are set to start in July, according to a Monday letter from the defunct exchange. Blockworks’ own Felix Jauvin weighed in on X:

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Not to mention bitcoin miners “need to aggressively sell their bitcoin reserves” as their costs have more than doubled following the Bitcoin halving in April, noted ZX Squared Capital co-founder CK Zheng.

Mining giant Core Scientific, for example, self-mined 447 BTC and sold 453 BTC last month (it must sell all the bitcoin it mines, per terms upon emerging from bankruptcy in January). Rival Marathon Digital sold 390 of the 616 BTC (63%) it generated in May, and holds about 1,000 less bitcoin than it did at the start of June, according to CryptoQuant data.

“On the demand side, the institutional investors will jump in to build their new bitcoin positions when the price is pulled back to an attractive level,” Zheng told Blockworks. “The allocation to bitcoin by these investors is still at the very early stage.”

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Overall, BTC’s failure to break into new territory (despite numerous chances) has scared people away for now, added Ledn CIO John Glover.

“The main factor continues to be that the market is positioned long and this sell-off is leading to position reduction by those who expected a fast move up to new highs,” Glover said.

It wasn’t long ago some were optimistic that bitcoin would hit $100,000 by the end of 2024 — citing strong bitcoin ETF flows, bipartisan crypto policy momentum in the US and the European Central Bank lowering rates as catalysts for a breakout. But BTC funds have endured outflows in consecutive weeks, Congress is moving slowly and the Fed opted not to follow the ECB’s lead.

Still, Zheng said the bitcoin bull cycle has probably not even hit its halfway point. The “problematic” US debt level, continued institutional adoption and the eventual Fed interest rate cut is set to spur a new all-time high in the next 12 months, he added.

Glover predicts the rally to pick up again toward the end of the summer as a result of ether ETF launches or a jump in inflationary pressures. He gives a target BTC peak for this cycle to be between $85,000 and $95,000.

But in terms of our headline question, BTC likely has more room to fall, the executives said.

Bitcoin’s current mining cost of about $53,000 will most likely serve as the floor of this short-term decline, Zheng said. Glover pegs the floor for this correction to be about $56,500.

Zheng added: “Any significant decline of bitcoin price at today’s level will be a great entry point for the long term investors.”

— Ben Strack

$1.2 billion

The amount of investor capital that has left crypto investment products globally over the past two weeks, according to CoinShares data.

Net outflows from crypto vehicles came in at $584 million last week alone — driven by “pessimism amongst investors for interest rate cuts by the Fed this year,” CoinShares’ James Butterfill said in a Monday report.

Bitcoin products saw the most bleeding, losing $630 million from June 17 to June 21. The US spot BTC funds accounted for about 86% of those outflows.

On Our Radar

Happy Monday! We’re in the swing of summer and there’s a busy week of economic data before the July 4 holiday. Here’s what’s on our radar:

Initial jobless claims, as always, will be published on Thursday. After seeing continuing claims increase last week, markets are going to want to see a softer reading. If the labor market can remain strong, economic growth is unlikely to slow too much — ultimately increasing the odds of a soft landing from the Fed. Fingers crossed.
The biggest event of the week will be the PCE report, scheduled to drop before markets open on Friday. Analysts are calling for the headline year-over-year figure to show a 2.6% increase in prices, with Core PCE (which excludes food and energy prices) to remain the same. PCE is the Fed’s preferred inflation gauge, so a drop in May would increase the odds of an autumn rate cut, likely helping equity prices along the way.
We have another busy week for Fed speakers. Fed Board Governor Lisa Cook will give remarks Tuesday, followed by Richmond Fed President Tom Barkin and Governor Michelle Bowman on Friday. After last week, it’s unlikely any will deviate from the party line too much, but it never hurts to tune in.

— Casey Wagner

The ETH ETF homestretch

The fund groups poised to launch spot ether ETFs took another step forward on Friday, submitting amended registration statements (S-1s) to the SEC.

Finalizing language on these documents is a last step to get the products trading after the US regulator last month OK’d proposed rule changes from exchanges to list these ETH funds.

The issuers had received “light” suggested revisions from the SEC on June 14, people familiar with the filings told Blockworks last week.

The latest S-1 amendments — while indicating a seemingly smooth back-and-forth between issuers and the SEC — did not include much groundbreaking info.

Among the new tidbits, however, was the 0.20% planned fee for the VanEck Ethereum Trust. Only Franklin Templeton had revealed its planned price — at 0.19% — prior to that.

These fees are similar to those of the spot bitcoin ETFs launched in January. Some industry watchers have said they expect ETH fund inflows to be roughly one-fifth of the bitcoin ETFs, which have brought in about $15 billion in their first five and a half months.

Other firms are likely waiting for BlackRock — the world’s largest asset manager — to disclose the price for its iShares Ethereum Trust ETF “to see what they need to orbit around,” Bloomberg Intelligence analyst Eric Balchunas said in an X post.

SEC Chair Gary Gensler gave a vague “sometime over the course of the summer” timeline for ETH ETF launches. But the continuous SEC-issuers dialogue suggests this could wrap up sooner rather than later.

— Ben Strack

Bulletin Board

Bitcoin miner Riot Platforms said Monday it has requisitioned a special meeting of Bitfarms shareholders in a bid to replace board directors. It’s the latest development in Riot’s apparent push to take over the company.
Days after reports circulated that the CFTC had opened a probe into Jump Crypto, president Kanav Kariya announced his departure from Jump on X Monday. His post did not mention any regulatory hurdles or legal matters.
Reps. French Hill (R-Ark.) and Chrissy Houlahan (D-Pa.) last week visited Nigeria to see jailed Binance executive Tigran Gambaryan. The lawmakers said they are pushing for embassy involvement in bringing Gambaryan home.

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