Bitcoin fell 8% from September 4 to September 6, falling below the $54,000 support level for the first time in over a month. The correction accelerated after the release of US labor market data, although negative momentum was built due to continued outflows from Bitcoin spot exchange-traded funds (ETFs).
Traders are now XEM at whether there are additional factors contributing to the recent price weakness and how likely it is that Bitcoin will return to sub-$50,000 levels.
US Jobs Data and Fears of a “Tech Bubble” Impact on Bitcoin Price
It is important to assess how the weaker-than-expected US nonfarm payrolls data will impact the Federal Reserve’s strategy of cutting interest rates without triggering a recession, Sonu Varghese, global macro strategist at Carson Group, told CNBC. CNBC said that “payroll data shows risks are rising as the labor market is clearly weakening and the Fed needs to step in to reduce risks.”
Still, there is no consensus on whether the September 6 jobs data will increase the likelihood of a broader stock market correction. However, the CME FedWatch tool shows the likelihood of a 50 basis point rate cut in September has increased. The S&P 500 is on track to fall 4% for the week, potentially marking its worst five-day performance of 2024, led by declines in the technology sector.
“The market is swinging between the idea that bad news is bad news, bad news is good news, and the feeling that it could spark hope that the Fed will act more aggressively than the market has anticipated,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. In short, traders are concerned about the risk of a recession but optimistic about the possibility of a shift to less restrictive monetary policy.
Zach Pandl, director of research at Grayscale Investments, was more optimistic. He noted, “The August jobs report hit the sweet spot for Bitcoin: the labor market has slowed, which will allow the Fed to cut interest rates, but there are no signs of a recession.” Pandl also mentioned that the U.S. presidential election in November and “the massive U.S. budget deficit” create a favorable environment for institutional Bitcoin adoption.
Given the short-term volatility in traditional markets, especially the tech and artificial intelligence investment sectors, it is clear why investors are reluctant to increase their Bitcoin positions, despite the recent price decline. Additionally, Warren Buffett’s Berkshire Hathaway, which is reducing its stake in Bank of America, only adds to the bearish sentiment.
The latest seven-day record for outflows from U.S.-listed Bitcoin spot ETFs has raised questions among traders, who are now speculating whether the current price action reflects a move by savvy investors anticipating further volatility, raising the possibility of chaos in risk markets. Some have suggested that fears of a “tech bubble” are driving demand for short-term government bonds, while others point to stress in the commercial real estate sector.
Regulatory Actions and Sell-Off Fears from the Bitcoin Mining Industry
Whatever is making traders more risk-averse, the yield on the two-year U.S. Treasury note has fallen to a two-year low. Investors are willing to accept lower returns in exchange for the safety of these bonds.
Adding to the gloomy tone is a recent negative ruling in Coinbase’s bid to dismiss a class-action lawsuit filed by shareholders. The plaintiffs allege that the exchange misled investors about the risks of regulatory action and potential asset losses. While the ruling may not directly impact Bitcoin’s price, it does reduce the incentive for institutional investors to enter the market.
Bitcoin investors are also concerned that Miners may be forced to sell some of their BTC . According to Glassnode data, Miners have been accumulating Bitcoin since August 15, but as the price remains below $60,000, selling pressure from Miners may increase. In short, both macroeconomic factors and regulatory concerns, combined with the fear of Miners sell-offs, are contributing to the bearish sentiment around Bitcoin.
FOLLOW US ON FACEBOOK | TELEGRAM | TWITTER
Disclaimer: All content on this website is for informational purposes only and does not constitute investment advice. Readers should conduct their own research before making any investment decisions. We are not responsible, directly or indirectly, for any damages or losses arising in connection with the use of or reliance on any content you read on this website.