Bitcoin Price Drop

Bitcoin prices have plummeted 30% over the past week, reaching a multi-month low of $49,120 on Monday, down from a high of $70,000 on July 29.

In contrast, mining stocks have fallen by 18%, while the Nasdaq experienced a modest 3.1% dip.

Factors for Market Decline

H.C. Wainwright attributes the recent sell-off in both crypto and equity markets to three main factors:
1. Fears of a hard landing for the U.S. economy due to weak data.
2. The unwinding of a popular global carry trade after the Bank of Japan’s rate hike.
3. Escalating geopolitical tensions in the Middle East.

Wainwright predicted a potential correction, noting that the pain might not be over. In mid-April, they suggested Bitcoin could retrace to the low-to-mid $50,000 range due to macroeconomic and geopolitical headwinds.

Caution Among Investors

Despite a medium and long-term bullish outlook, H.C. Wainwright remains cautious about the short-term. They noted Bitcoin’s rising correlation to equities during market stress, confirming its status as a risk asset.

“Further weakening of economic data or escalated tensions in the Middle East could lead to additional downward pressure on Bitcoin prices,” the firm warned. They predict a series of rate cuts from the Federal Reserve could eventually allow Bitcoin to resume its upward trajectory in the next phase of the bull cycle.

Mining Economics and Future Picks

The economics of mining have also declined, with hash prices dipping to $0.036 per terahash per day, roughly a 65% decrease from pre-halving levels. H.C. Wainwright expects large public miners with superior access to capital to continue gaining market share over smaller private counterparts. They have recommended CleanSpark as their top pick for 2024 due to its scale, solid balance sheet, and low production costs.

Institutional Adoption

In related news, Morgan Stanley will begin allowing its financial advisors to offer Bitcoin ETFs to select clients starting this week. From August 7, the firm will enable its 15,000 financial advisors to promote shares in two U.S. spot Bitcoin ETFs—BlackRock’s iShares Bitcoin Trust (NASDAQ:IBIT) and Fidelity’s Wise Origin Bitcoin Fund (NYSE:FBTC)—to eligible clients.

H.C. Wainwright views this announcement as a significant development that could accelerate Bitcoin ETF approvals at other leading banks, potentially driving a re-acceleration of inflows into the Bitcoin ETFs.