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Bitcoin's image / Photo by Reuters-Yonhap

Bitcoin has posted a modest rebound over the past week, climbing from the $63,000 range to the $65,000 level. However, compared to the all-time high of approximately $120,000 recorded in February of this year, the cryptocurrency is still struggling to find its upward momentum. With the bearish trend dragging on for over four months, market observers are increasingly analyzing the current climate not merely as a temporary correction, but as a prolonged, structural downturn.

As of 4:00 p.m. on June 16, Bitcoin was trading at $65,715 on the U.S. cryptocurrency exchange Coinbase, up a slight 2.48% from the previous day. Despite the daily uptick, the price represents a sharp plunge of around 20% compared to just a month ago.

The primary drag on performance stems from fading expectations for a Federal Reserve rate cut, which has cooled investor appetite for risk assets. Caught in this broader sentiment shift, Bitcoin has failed to shake off persistent selling pressure.

Furthermore, the capital flows into spot Bitcoin ETFs, which acted as the engine for the previous bull market, are no longer what they used to be. While the approval of these ETFs last year funneled billions of dollars in institutional capital into the market and drove prices to record highs, net inflows have recently flattened, with instances of net outflows becoming more frequent. Analysts point out that this cooling institutional demand is sapping Bitcoin's upward momentum.

Adding to the pressure is the current rally in U.S. tech stocks, particularly those linked to artificial intelligence and semiconductors. As AI-related firms like Nvidia continuously rewrite their record highs, investment capital is migrating away from the crypto space and into the equity market. "The breakout in AI-related stocks has significantly raised the opportunity cost of holding Bitcoin," noted K33 Research in a recent report, adding that spot Bitcoin ETFs have logged their second-largest three-week streak of consecutive outflows on record.

Predictably, trading volumes have dried up as well. As the price contraction and sideways trading drag on, retail participation has dwindled, leading to a noticeable drop in overall market liquidity compared to the peak periods.

Experts emphasize that the current correction differs fundamentally from previous crypto winters, such as the market crash triggered by the FTX collapse in 2022. Rather than being driven by industry-specific crises, the current market is being shaped by macroeconomic variables, primarily interest rates and institutional fund flows.

Consequently, a revival in rate-cut expectations and a turnaround in ETF inflows are viewed as the make-or-break catalysts for a rebound. Markus Thielen, founder of 10x Research, noted in a recent brief that "the core drivers behind Bitcoin's decline are sticky inflation concerns and ETF outflows," adding that a sustained recovery will hinge heavily on upcoming inflation metrics and a return of institutional buyers.

Vetle Lunde, head of research at K33 Research, offered a similar outlook: "The surge in AI-backed assets has made holding Bitcoin a costly choice in terms of opportunity. If institutional appetite remains soft and ETF bleeding continues, Bitcoin is highly likely to face choppy, volatile trading in the near term."

                                                                                                               Kim Min-ju