Financial markets continued to be volatile on Wednesday.
According to Bitpush data, after BTC hit a high of $57,760 on Wednesday morning, bears pushed the price below $55,000. As of press time, Bitcoin is trading at $55,255, down 1.62% in 24 hours.
Altcoin fell more than they rose, with only a dozen tokens in the top 200 by market capitalization rising.
Popcat (POPCAT) led the gains, up 21.85%, XRP rose 20.24%, and Aragon (ANT) rose 7.8%. Safe (SAFE) led the losses, down 15.8%, Notcoin (NOT) fell 12.5%, and Lido DAO (LDO) fell 10.8%.
The total cryptocurrency market cap is currently $1.93 trillion, and Bitcoin’s dominance rate is 56.1%.
U.S. stocks closed lower, with the S&P, Dow Jones and Nasdaq closing down 0.77%, 0.60% and 1.05%, respectively.
Recession fears persist
Investors continue to grapple with recession fears. JPMorgan Chase & Co. now sees a 35% chance of a U.S. recession by the end of the year, up from 25% at the beginning of last month.
The U.S. news "suggests a sharper-than-expected weakening in labor demand, with early signs of layoffs emerging," JPMorgan economists led by Bruce Kasman wrote in a note to clients on Wednesday.
The team maintained the probability of a recession by the second half of 2025 at 45%, saying: "Our modest upward revision to our assessment of recession risk is offset by a larger revision to our assessment of the interest rate outlook." JPMorgan now sees only a 30% chance that the Federal Reserve and other central banks will keep interest rates high for a long time, down from a 50% chance just two months ago. As U.S. inflation pressures decline, JPMorgan expects the Fed to cut interest rates by 50 basis points in September and November.
Market sentiment is turning towards the possibility of aggressive rate cuts. According to CME's "Fed Watch" data, the probability of the Fed cutting interest rates by 25 basis points in September is 28.5%, and the probability of cutting interest rates by 50 basis points is 71.5%.
Speaking of Bitcoin’s recent 30% drop from $70,000 to $49,053, Brian Dixon, CEO of OTC Capital, said: “In my opinion, this is a short-term event and a normal fluctuation in the Bitcoin bull market. Bitcoin fell 20%-30% 11 times during the 2017 bull market, but still hit all-time highs. Bitcoin fell 20%-30% four times during the 2020-2021 bull market, but still hit all-time highs.”
Analyst: Wait and see until Bitcoin drops to $40,000
While Tuesday’s rebound in cryptocurrencies and stocks has many investors hopeful, Markus Thielen, head of research at 10x Research, sees more downside ahead and advises crypto traders to wait until Bitcoin falls to $40,000.
Thielen wrote on Wednesday: "To ideally time the next bull run, we aim for a Bitcoin price drop to the low $40,000s. Monday's big drop is a landmark reversal since the launch of the Bitcoin spot ETF on January 11/12, 2024, and is a key reference point in the market's recent history. Traders focus on the technical aspects of price movement, and a thorough understanding of this analysis can make more informed trading decisions. Even the most optimistic crypto traders must admit that the declines are getting bigger: 56,500 in May, 53,500 in July, and 49,100 in August."
Thielen said: "Bitcoin is attempting to recover, but after the recent support breakout, strong resistance from a clear downtrend may prove more challenging. Our bearish view stems from monthly technical indicators, which, as of May 2024, have reached levels that have historically seen price reversals in bull markets, such as January 2018 and April 2021. We can only confirm this with hindsight, however, it has periodically influenced our expectations for price declines in April, June, and August 2024."
Thielen warned that “from a technical perspective, the 56,000/57,000 area is expected to serve as an important resistance level for Bitcoin, however, as incomplete technical indicators show downside risk, a firm stop loss must be set for long positions (54,000)”.
Thielen’s $40,000 BTC prediction has been supported by several analysts, including Gokhstein Media founder David Gokhstein, who tweeted: “I’d like to see Bitcoin drop to $50,000, or even $40,000. This would be a great opportunity to buy further.”
Timothy Peterson, founder of Cane Island Alternative Advisors, believes that Bitcoin is just as likely to fall to $40,000 in the next 60 days as it is to soar to $80,000.
Coinbase analysts said in a report this week: "We believe that market tensions will continue in the short term, but shorts may be squeezed, leading to a market rebound in the coming days. But don't be mistaken that this market chaos is over. Cryptocurrencies are still affected by some technical factors, such as Genesis distributing BTC and ETH in physical form as part of its bankruptcy liquidation plan. We believe that this phase may last until the Federal Reserve's decision in mid-September, so we retain our forecast for market volatility in the third quarter of 2024, but also believe that this pullback does not represent the beginning of a new market cycle. On the contrary, the current sell-off is in line with our defensive strategy in the third quarter of 2024 and a more positive outlook for the fourth quarter of 2024."
