Why did the Bitcoin price crash 41% in June?

Increasing interest rates and inflation worries combined to hammer cryptos in June.

| More on:
A bitcoin sits on a graph with red arrow going down

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Bitcoin price crashed 41% in June 
  • Investors have been offloading risk assets amid fast rising interest rates 
  • As prices slid, more crypto investors found themselves underwater and may have sold their holdings, adding to the price pressure 

June wasn’t the best of months for the Bitcoin (CRYPTO: BTC) price.

At all.

Depending on your time zone, the world’s biggest token by market cap kicked off June trading for US$31,693. By the time the calendar rolled over into July, the token was worth $18,880, down 41% for the month.

US$31,693 also happens to be the high for the Bitcoin price in June, with it trading as low as US$17,700, according to data from CoinMarketCap.

While Bitcoin has recovered slightly in July, currently fetching US$20,273, it remains down more than 70% from its 10 November all-time highs.

So, what went wrong in June?

Inflation and rising interest rates

The biggest headwind facing the entire cryptocurrency market has been hot running inflation in the developed world and the accompanying interest rate hikes being rolled out to tame that.

An outsized 0.75% interest rate hike by the US Federal Reserve and hawkish guidance on more rate rises ahead saw most risk assets sell-off in June. The tech-heavy NASDAQ, as a handy benchmark, closed the month down 9%.

Of course, that’s far less than the Bitcoin price tumbled.

Why did the Bitcoin price crash 41% in June?

Just as the token has the potential to deliver outsized gains when markets are running strong, it also has proven itself able to deliver painfully outsized losses when the selling fever hits.

Bitcoin looks to have come under extra selling pressure after falling below some key levels.

Nothing technical, mind you.

But as the Bitcoin price slipped below US$30,000, a growing number of holders found themselves in the red. In fact, by mid-June, anyone who’d bought the crypto since early December 2020 was sitting on a loss, with analysts estimating half of all investors were underwater.

This looks to be pressuring a number of institutional investors to lighten their crypto holdings.

According to Wilfred Daye, chief executive officer of Securitize Capital:

There may be capitulation because larger institutional players, guys who got in during the current cycle, they’re at risk of selling their assets and liquidating their assets. This particular cycle that started late 2020, you had a lot of institutional folks getting in at a higher price, so I think it’s more institutional capitulation.

Then there’s the crypto miners.

Securitize Capital estimates it costs some crypto miners more than US$20,000 for every Bitcoin they mine. And as the Bitcoin price kept sliding, more miners were selling their tokens to pay their bills, adding to the supply.

According to JP Morgan:

Offloading of Bitcoins by miners, in order to meet ongoing costs or to de-lever, could continue into Q3 if their profitability fails to improve… [Selling] has likely already weighed on [Bitcoin] prices in May and June, though there is a risk that this pressure could continue.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cryptocurrencies

a shiba inu dog looks happily at eh camera with his tongue out while his owner hods him on his chest as he sleeps on a hammock.

Here’s why the Dogecoin price has had such a great week

Economic data out of the United States and a surprise announcement by BlackRock offered some healthy tailwinds to cryptos over…

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price

Why this Bitcoin maximalist says all other ‘crypto is a scam’

Initially introduced in a 2008 whitepaper by one or more people going by the pseudonym of Satoshi Nakamoto, Bitcoin launched…

Read more »

A hand reaching into a computer to grab digital money, indicating a rise in the use of cryptocurrency

Why an RBA-issued crypto-like currency could soon be a reality

The RBA is piloting a central bank-baked digital currency.

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin.

Can the Bitcoin price reach US$30,000 again in 2022?

Rising interest rates have resulted in significantly less institutional investor interest in cryptos.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.

Could this key metric signal more bad news for the Bitcoin price?

Crypto investors are keeping a close eye on the signals that could see the US Federal Reserve begin to ease…

Read more »

Man sitting at a desk facing his computer screen and holding a coin representing discussion by the RBA Governor about cryptocurrency and digital tokens

Is it smart to use dollar cost averaging to buy Bitcoin?

Should investors consider a DCA strategy for cryptocurrencies like Bitcoin?

Read more »

A hip young guy works at his home workstation with two screens and a gamers chair, keeping an eye on his crypto investments.
Share Market News

Bitcoin price dips in August after soaring 22% in July. What’s going on?

The greater presence of institutional investors in crypto markets looks to be adding to the correlation between cryptos and other…

Read more »

A very sad beagle cross dog lays dejectedly on a sofa with his short legs stretched out in front of him in a pose of flat defeat as he stares sadly at the camera.

Expert panel slashes 2022 outlook for Dogecoin price. Here’s why

Originally created as a joke, Dogecoin still has a market value of nearly US$9 billion despite crashing 91% from last…

Read more »