The Bitcoin (BTC) cumulatively dropped nearly 7.5% since the announcement of the results of the vote to raise the U.S. government’s “debt ceiling” and has returned to levels below $26,000 - close to the $25,700 mark – which is viewed as a particularly unnerving event to most crypto investors amid a nice rebound in global equities. What could be the reason for such weak cryptocurrency dynamics, and are we on the verge of another “crypto-winter”?

Last week, Bitcoin ended its worst month of trading since November, ending May down 7.9% after trading in a tight range between $26,000 and $28,000. Technical analysts see $25,200 as the key support level for Bitcoin, piercing which BTC would enter the bear market.

As the summer is getting full-fledged, the worst for the world finances was avoided, and there are no new obvious catalysts, and cryptocurrency dealers tend not to accumulate selling orders, and any large sale order can cause more selling pressure, the situation at the moment leaves much to be desired. In addition, the volume of liquidations of long positions on the world's largest crypto exchanges is currently about three times as high as the volume of short liquidations. Numerous DeFi startup projects – especially based on the ERC20 protocol – that attract medium-term money are helping a little, but it does very little to restore broad bullish sentiment.

The Bitcoin Volatility Index (BVI), which measures how much Bitcoin's exchange price fluctuates relative to its value, has fallen to 1.41% in the past 30 days, which was last seen in January of this year. Over the past 60 days, the BVI has dropped to 1.63%.

Meanwhile, BTC has also posted its first monthly loss since last December, losing about 7% in May. Cryptocurrency exchanges are marking their 7th consecutive week of outflows. As of June 4, another $62 million had experienced an outflow.

The reason for the recorded outflow of funds is also the low trading activity: the current average daily trading volume is 60% below its annual average. This is similar to the situation in the larger cryptocurrency market, where volumes have fallen 55% over the past seven weeks. In Bitcoin, even this week there is a slight outflow of $2.7 million, while in bets against Bitcoin (“shorts” on Bitcoin) the outflow was $6.3 million. While the outflow from short positions on Bitcoin is smaller in absolute terms, it is 44% of the total AuM volume over the past 6 weeks, compared to 0.9% for long positions on Bitcoin. This suggests that investors are cashing out and closing short positions, rather than pointing to a fundamental deterioration in sentiment toward this asset.

An additional powerful negative factor for Bitcoin was another subpoena in the SEC case against Binance subsidiary Binance.US. This is a truly surprising story, as the world's largest cryptocurrency exchange, Binance, does not and has never applied for a license to operate in the United States. Accordingly, the essence of the series of lawsuits, which are invariably loudly broadcast through the media (what the founder of Binance CZ calls "FUD"), cannot be anything more serious than the settlement of violations of the reporting procedures of this subsidiary of the parent crypto exchange, which once being proven (as long as the legislators confirm major administrative procedural violations, even compliance violations) can not threaten Binance anything more significant than a large penalty. Moreover, linking Bitcoin to Binance's problems also looks like nothing more than manipulation, since only no more than a quarter of all mined Bitcoins are stored with Binance, while the bulk of them are found on the so-called cold wallets – including those owned by Satoshi Nakamoto – and other exchanges – BitFinex in particular.

However, most experts published on such well-known opinion platforms as Cointelegraph and Bitcoin.com believe that retail demand for Bitcoin is likely to remain high over the next year in anticipation of the next event, called the halving of the world's largest cryptocurrency. This was also mentioned in a recent research report by the U.S. banking giant JPMorgan. The recent rise in retail demand can be partly explained by the emergence of Bitcoin ordinales (coins based on the new Ordinals protocol) and BRC-20 tokens.

However, the most important boost to investor interest will be the approach of the April 2024 “Halving”. In fact, halving events, which are part of the original Bitcoin code, occur every 210,000 blocks, or about once every 4 years. During these events, rewards for mining Bitcoin are cut by 50%. According to the JPMorgan team, this effectively doubles the cost of mining Bitcoin and creates a “positive psychological effect.”