Although the crypto sector had a very strong first quarter, it lagged somewhat in the second quarter. This week is typical of this trend: the price of Bitcoin fell by 6 percent, while the Nasdaq actually rose. Several factors are contributing to the crypto market’s underperformance in the current second quarter.

Why is the crypto market lagging behind?

BTC rose 67 percent in the first three months of this year to a new all-time high of almost $74,000. However, Bitcoin has failed to continue this upward trend since March.

The US Bitcoin ETFs contributed significantly to this increase, but the effects now appear to be slowly fading away. Another reason for the stagnation of the crypto market is the lack of US interest rate declines. At the beginning of this year, several interest rate decreases were expected, but this expectation has now been adjusted to only one interest rate decrease.

These external factors converge with a crucial Bitcoin price level. In recent months, Bitcoin has been hovering around the former all-time high of $69,000, which BTC reached in 2021. This long-term level appears to be a logical resistance that remains a major obstacle for the time being.

“When a market is repeatedly rejected at a specific price level, it has less and less to do with events or fundamentals,” says Markus Thielen of 10x Research. “Large sellers consider these levels overvalued. The all-time high of November 2021 is a level where long-term holders will want to sell their Bitcoin.”

On-chain data and Bitcoin hashrate decline confirm trend

According to Markus Thielen of 10x Research, more and more long-term holders are taking profits after a strong first quarter. The on-chain data also confirms this: at the beginning of this week, a wallet that had been inactive since 2018 moved 8 thousand BTC to Binance.

In addition, data from CryptoQuant shows that the number of wallets that have been inactive for at least 12 months is decreasing. This activity coincides with another factor contributing to the ‘summer hibernation’ that Bitcoin appears to be in.

Since this week, the Bitcoin hashrate has been declining. This has everything to do with the upcoming Bitcoin halving. Old equipment will no longer be profitable after the halving and will need to be replaced.

All in all, the external conditions are not as favorable as in the first quarter. However, a prolonged correction is not unusual after such a strong start to the year.

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