Bitcoin Faces Potential $60K Drop Amid Thin Bid Liquidity

Will Bitcoin Drop to $60K? Analysts Warn of Thin Bid Liquidity

by Faruk Imamovic
Bitcoin Faces Potential $60K Drop Amid Thin Bid Liquidity
© Getty Images/Dan Kitwood

Bitcoin is once again making headlines, and this time it’s for its potential downward movement towards $60,000. The cryptocurrency dipped below $68,000 during the June 11 Asia trading session, causing concern among analysts and investors. The failure to hold the $69,000 support level has led to a cautious atmosphere in the market, with a price turnaround still in sight, albeit uncertain.

Weak Support and Lack of Heavy Bids

The recent 3% dip took Bitcoin to lows of $67,320 on Bitstamp after the daily close, demonstrating a lack of robust support at the crucial $69,000 level. This decline through a thin exchange order book has left Bitcoin bulls struggling to maintain upward momentum.

Keith Alan, co-founder of trading resource Material Indicators, had previously flagged the insufficient bid support as a potential red flag for BTC's price strength. "Sure we have some laddered bid support in here, but not a heavy, heavy concentration of it — and really, it’s not even heavy down to $60,000 if I can be completely honest," Alan stated during his latest YouTube update.

An accompanying chart from Material Indicators showcased the order book liquidity for the BTC/USDT pair on Binance, the largest global crypto exchange. In a follow-up post on X, they noted that Bitcoin had formally rejected $69,000 as support and lost the 21-day moving average, a key short-term trendline. "Support at the 21-Day Moving Average and the R/S Flip at $69k have both been invalidated," they observed.

Upcoming Economic Data and Potential Volatility

This week's primary potential volatility catalyst for Bitcoin and the broader crypto market comes from U.S. macroeconomic data, including the Consumer Price Index (CPI) and Producer Price Index (PPI). Additionally, the Federal Reserve's latest interest rate decision and a press conference by Chair Jerome Powell are expected to have significant impacts.

Popular trader Skew highlighted the importance of these events, noting that "So far CPI/PPI has been around the highs of this range & FOMC resulting in local lows. Interesting few days ahead."

While some analysts predict a further drop, others are more optimistic. Credible Crypto, a well-known trader and market commentator, suggested that the outcome might not be as severe as a plunge to $60,000. He pointed out that liquidity is being dynamically added and removed from the market by large-volume traders, which could prevent Bitcoin from falling below $65,000.

"We continue to see spot absorption on each and every move down, even on lower timeframes," Credible Crypto summarized to his X subscribers. He noted that overhead resistance at $72,000 was "pulled immediately" once Bitcoin began reversing. "What are the odds we front run range lows and 62-65k and just reverse from here? I think they are decent," he concluded. "No guarantees of course, but we will know soon enough with developing PA over the next 24 or so hours."

Bitcoin© Getty Images/Dan Kitwood

Bitcoin’s Performance vs. Warren Buffett’s Portfolio

Since its inception in 2011, Bitcoin has consistently outperformed traditional investment portfolios, including that of Warren Buffett. Known for his cautious, long-term investment strategy, Buffett’s portfolio includes top holdings like Apple, Bank of America, American Express, Coca-Cola, and Chevron Corp. Despite its conservative nature, his portfolio has delivered a compound annual growth rate (CAGR) of 10.03% over the past 30 years with a 13.67% standard deviation, according to Lazy Portfolio ETF.

Warren Buffett’s Conservative Strategy

Buffett's approach to investing emphasizes long-term value, prudent risk management, and a preference for fundamentally strong companies. This strategy has resulted in impressive returns with relatively low volatility compared to broader U.S. stock portfolios.

For instance, U.S. stock portfolios have achieved similar returns but with higher standard deviations, indicating greater risk. In contrast, Buffett’s portfolio demonstrates that impressive results can be achieved without taking on excessive risk, aligning with his reputation as the "Oracle of Omaha."

Warren Buffett
Warren Buffett© Getty Images/Chip Somodevilla

Bitcoin’s Exceptional Returns and Volatility

In comparison, Bitcoin's performance has been extraordinary. Since 2011, Bitcoin has delivered an average annual return of around 104%, far surpassing both Buffett's portfolio and traditional U.S. stock portfolios. This incredible growth has attracted many traders and investors, who view Bitcoin as "digital gold" — a hedge against inflation and currency devaluation.

Despite its impressive returns, Bitcoin remains highly volatile. Its price is subject to extreme fluctuations, which can be a significant deterrent for risk-averse investors. However, Bitcoin’s volatility has somewhat decreased in recent years, with its price movements now showing lower volatility than several prominent S&P 500 stocks, including Tesla, Meta, and Nvidia.

The Buffett Portfolio, while more conservative, offers consistent returns with manageable risk. Bitcoin, on the other hand, has provided significantly higher returns but comes with substantial volatility and frequent downturns. Notably, Bitcoin’s status as a digital asset has been further solidified by institutional investments from companies like MicroStrategy and Tesla, along with the launch of spot Bitcoin exchange-traded funds (ETFs).

As Bitcoin continues to navigate the current market conditions, its future remains a topic of intense discussion and analysis. Will it stabilize and offer more predictable returns, or will it continue to be a high-risk, high-reward asset? The coming days and weeks will be crucial in determining Bitcoin's near-term trajectory.

Potential Impact on Investors

For investors, understanding the dynamics of Bitcoin’s market movements and its comparison to traditional investment strategies is crucial. While Bitcoin offers unparalleled growth potential, it also demands a higher risk tolerance. Conversely, traditional portfolios like Buffett’s offer steady, reliable growth with lower risk, appealing to more conservative investors.

The current market conditions and upcoming economic data will play a significant role in shaping Bitcoin's price action. Investors should stay informed and be prepared to adjust their strategies accordingly, balancing their portfolios to align with their risk tolerance and financial goals.