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Bitcoin and crypto struggle in June as economy appears set to recover

2021.07.19 Hunain Naseer

A look at the crypto market's development and performance in June 2021 — Market Watch Monthly

Key takeaways

  • June marked BTC’s third consecutive month in the red, with a loss of 7.49%.
  • BTC underperformed global assets for the third straight month as the economy appears to be on the path to recovery.
  • Altcoins, including ETH, have continued to slide in the current market scenario, with losses around 20% or higher.
  • DeFi has shown resilience in terms of activity and value-locked metrics, but prices crashed majorly in June. 

Bitcoin recap

June was the third consecutive month in the red for the leading digital currency, although losses were relatively modest — BTC ended the month down 7.49%, compared to May’s 35.31%. Bulls had attempted to push the price higher, driving it roughly 10% above the month’s opening by June 14, but the bears ended up pushing BTC down by roughly 20% by June 22 (from the month's starting price). Discounting May, the last time BTC suffered a monthly loss greater than June’s was in September 2020.

While June had the beginnings of a potential recovery — especially as BTC crossed and stayed over 40,000 USDT for three days (June 14–16) — the lack of market confidence resulted in massive selling pressure for assets across the market. By the end of the month, Bitcoin had fallen into a bearish pennant pattern on the daily price chart, and that has continued to play out well into July.

OKEx’s BTC/USDT daily chart. Source: TradingView

The futures market was also indicative of June's weakened market confidence after the May crash — with minor exceptions when bulls rallied only to take quick profits instead of holding long-term positions.

Overall, Bitcoin, and the entire crypto market, remained depressed in June, with no real signs of recovery in sight. This performance can be linked to a global shift seen across major assets, as discussed below. Meanwhile, the only silver lining to such price action is the possibility of bear exhaustion following sustained selling.

Global assets outperformed BTC

The global economy has changed drastically since the COVID-19 outbreak, but there have been some positive signs in the last couple of months, especially with vaccination drives in full swing.

According to the World Bank, "The global economy is poised to stage its most robust post-recession recovery in 80 years in 2021."

The impact of these changes in sentiment could be seen across markets in June. For instance, major U.S. stock indexes, such as the Nasdaq and S&P 500, were green for the month, along with oil and the dollar index. These performances reflect forward-looking positivity for economic growth. On the flip side, both Bitcoin and gold recorded losses for the month as investors discounted potential safe-haven assets.

Bitcoin’s June performance compared with major assets. Source: TradingView

Notably, the biggest gain in June was posted by the dollar index, which rose 2.81%, a figure not seen in recent years. Historically, BTC and the dollar index have been inversely correlated, but Bitcoin’s correlations — or lack thereof — are often shifting, given how nascent crypto assets are.

Bitcoin's underperformance against major asset classes in June seems to indicate that the market has reverted to more traditional, well-established investments as the global economy begins to show signs of recovery and growth.

June’s trading sentiment on OKEx

Bitcoin continued to struggle in June, and any hopes of a major recovery were dashed by selling pressure emerging with each move to the upside. When looking at OKEx trading data, we see a general decrease in volume, which is expected during bearish spells, and some interesting changes in trading volume breakdowns.

OKEx trading volumes breakdown for June 2021. Source: OKEx

As shown in the chart above, spot trading accounted for 19% of all volume, down from May’s 25%. Similarly, futures trading, which stood at 39% of all volume in June, was also down from May’s 43%. However, the perpetual swap market saw an increase in trading volume, jumping from 32% in May to 42% in June.

This shift could potentially reflect traders looking at short-term opportunities as opposed to long-term commitments — a sentiment also highlighted in our recent BTC futures data analysis

The Crypto Fear & Greed Index also showed "Extreme Fear” throughout June, and premiums on futures contracts continued to erode as sentiment failed to recover during the month.

Alts dropped much steeper than BTC

Altcoins dropped sharply in May, and that trend continued in June — with each BTC downturn pressuring alts even more. Notably, ETH, which ended May with a relatively modest loss of 3.6%, fell more than 20% in June.

Similarly, other top cryptocurrencies such as DOT, XRP, UNI and LINK posted losses of around 30% or more.

Many major altcoins retraced around 30% or more in June. Source: OKEx

As is typical of bearish market spells, altcoins lose more than BTC in terms of percentage value, which is because alts are, by nature, more speculative than the market leader. This means during bullish runs, they outperform BTC — but fall steeper during crises.

Corresponding with this trend, the Altcoin Season index had been on its way down in June and had only recently bounced from lows of around 33 in the previous week. At the end of June, however, it stood at 73.

Alts have been falling drastically since May. Source: Blockchain Center

DeFi activity and total value locked were resilient even though prices crashed

Decentralized exchanges and decentralized finance protocols had recorded massive growth in May, but the effects of the market crash nevertheless ran through the entire ecosystem. However, metrics such as monthly trading volumes on DEXs and the total value locked across DeFi protocols show how resilient this niche has been in the face of dwindling market confidence — even if the prices of protocol tokens crashed.

DeFi value locked figures for the last three months. Source: DeBank

June started with the gross value locked in DeFi at around $83 billion and ended with the figure at $75 billion, a drop of less than 10%. Moreover, these value-locked figures have remained largely static since the May crash, moving in a tight range and not falling below $50 billion.

Similarly, as per data from Dune Analytics, decentralized exchanges remained popular, with Uniswap in the lead — and even though trading volumes dropped, they were comparable to March figures.

DEXs saw volumes drop relatively modestly in June. Source: Dune Analytics

In terms of price performance, top DeFi assets lost value across the board, with only CRV managing to lose under 10%. The top losers included SNX, SUSHI and AAVE, followed closely by UNI, MKR, COMP and YFI, all of which had losses at 30% or more.

Top DeFi tokens saw major losses in June. Source: OKEx

Looking ahead

China’s crackdown on Bitcoin has cost the digital currency significantly, but there are positives to be expected in the aftermath. The closing of miners in China has resulted in a sharp drop in Bitcoin's hash rate and mining difficulty, which gives an opportunity for miners in other regions to expand their mining operations as the confirmation of new blocks becomes less difficult.

Moreover, this potential reorganization of BTC mining power could alleviate some of the biggest criticisms the Bitcoin network has faced in recent months, notably the lack of mining decentralization and an oft-touted negative environmental impact.

June saw Bitcoin network's mining difficulty and mean hash rate drop. Source: Glassnode

Moreover, global economic changes in the coming months — especially any major policy moves by the U.S. Federal Reserve — are likely to impact BTC and crypto prices. While July has largely seen the market’s negativity play out, we could potentially be nearing a bottom, both in terms of sentiment and prices. One of the major discussions right now is around CBDCs and how they impact digital currencies; however, initiatives like the one recently announced by Twitter founder Jack Dorsey could see Bitcoin survive this bearish spell and get back on track to recovery in the following months.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.