Bitcoin is doomed to fall to $20,000?

Over the past month, the S&P 500, the Nasdaq, and the Dow Jones have risen by 4.5%, 10%, and 2.9%, respectively, although there was no positive geopolitical shift. Bitcoin, in turn, has fallen nearly 17% compared to gold's -2.7%.

Why are digital assets losing their appeal to investors?

For starters, the crypto market has been under pressure for months in a generally unfavorable backdrop for risk assets, including stubbornly high inflation, which is preventing the Fed from cutting rates. The fact that tensions between Iran and the US have flared up again obviously doesn’t help the case either. 

Secondly, what was initially supposed to be a miracle, institutional money, has turned into a drawback. While it brought capital into the industry, in tougher conditions it can also amplify downside pressure, as selling comes from both retail investors and institutional players.

Then there is the continued delay of the CLARITY Act, meant to establish clear rules for cryptocurrency markets and define the distinction between digital commodities and securities. There are also concerns that with Donald Trump’s declining approval ratings, Democrats could regain control of Congress in the midterm elections, which could lead to a less favorable regulatory environment for crypto.

Now add in concerns around Strategy, which sold 32 BTC between May 26 and May 31 for about $2.5 million, according to an 8-K filing, to fund dividend payments on its preferred shares (STRC). Although relative to the company’s total holdings of more than 843,000 BTC the sale is insignificant, it has sparked concerns that further sales could follow. 

Finally, a weaker-than-expected earnings report from Broadcom has raised questions about how sustainable the AI-driven rally in equities really is. If the market loses one of its key growth drivers, the semiconductor sector, all risk assets could come under pressure. 

What to expect next?

Peter Schiff warns that the cryptocurrency could fall toward $20,000 as investor complacency is still too high for a real market bottom. In reality, however, much will depend on whether broader conditions improve, including inflation and thus monetary policy. It is also possible that some liquidity rotates out of crypto and into highly anticipated IPOs from companies like SpaceX, Anthropic, and OpenAI.