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While Bitcoin was trading at $59,076 yesterday, it dropped to as little as $57,127 in the course of the early Asian trading session today. BTC closed the week at $57,565, once more losing necessary ground needed to create a bullish reversal. The trajectory is impacted by several aspects.
#1: Macro Fears Of A Recession
The looming threat of a US recession is causing palpable tension in financial markets. This is very pertinent for Bitcoin, which has not yet weathered a full economic downturn since its inception.
Because the Federal Reserve gears up for its Federal Open Market Committee (FOMC) meeting on September 17-18, 2024, the discourse around monetary policy has intensified. The anticipation of a rate cut has been cemented by Jerome Powell’s comments on the Jackson Hole Symposium, with the CME FedWatch tool indicating a unanimous expectation of a rate adjustment.
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The breakdown of expectations reveals a 69% inclination towards a 25 basis points cut, while a big minority of 31% predicts a more aggressive 50 basis points reduction. In response to Tom Capital, a crypto analyst, such drastic cuts may very well be interpreted as signs of an economic crisis reasonably than mere adjustments, which complicates the investment outlook for Bitcoin.
“50 bps cut by the FED is an emergency cut, there’s simply no other solution to have a look at it. In case your current bullish thesis for crypto rallying is based on large rate cuts, it is advisable to reconsider,” Tom Capital noted through X. This sentiment was echoed by one other analyst, Skew (@52kskew), who highlighted the importance of upcoming US economic data releases, particularly the BLS jobs report due on September 6.
Tom Capital added: “Must be real shitty jobs data in lead as much as NFP on Friday, then a shocker NFP itself to get 50 bps (which isn’t out of the query given unreliability of information). Nevertheless, I reckon the sticker shock of a terrible NFP is the next probability risk off move, starting in Nas.”
#2: Bitcoin Seasonality
Rekt Capital, one other crypto analyst, provided insights into the seasonal patterns affecting Bitcoin. Historical data since 2013 shows a mixed performance for Bitcoin in September, with gains in some years offset by losses in others.
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“Is September really a down month for BTC? Since 2013, BTC saw monthly returns of +2.35%, +6.04%, and +3.91% across three Septembers. And across 6 Septembers, BTC saw negative monthly returns ranging between -1% to -7.5%, with only two instances of double-digit downside (i.e., -19.01% and -13.38%). Macro-wise, nevertheless, September is usually a month of consolidation,” Rekt Capital analyzed.
Bitcoin seasonality | Source: X @rektcapital
#3: Low Bitcoin Sentiment
Ali Martinez, by analyzing exchange-related on-chain data, pinpointed a sustained decline in investor interest and network utilization. “The Exchange Volume Momentum indicator shows a sustained drop in exchange-related on-chain activity, which normally points to lower investor interest in Bitcoin and decreased network usage,” Martinez stated, suggesting that the passion for using Bitcoin has cooled somewhat, potentially affecting its price negatively.
Bitcoin Exchange Volume Momentum | Source: X @ali_charts
Martinez added, “Bitcoin miners sold 2,655 BTC over the weekend, price around $154 million!”
#4: Technical Trading Conditions
The technical outlook for Bitcoin is bleak as well, with the cryptocurrency failing to secure a robust weekly close. “Bitcoin must Weekly Close above ~$58,450 to guard the Channel Bottom and secure it as support on this retest. Price is at this support straight away. A great close would even be ~$59,000 to get BTC above the blue Higher Low dating back to early July,” remarked Rekt Capital.
At press time, BTC traded at $58,036.
Bitcoin price, 1-day chart | Source: BTCUSDT on TradingView.com
Featured image from iStock, chart from TradingView.com