From August 27 to September 7, Bitcoin continued to fall, falling below $60,000, causing market sentiment. According to Coingecko data, Bitcoin fell from about $64,265 per coin on August 26 to $53,923 per coin on September 7. During this period, the U.S. Bitcoin spot ETF saw net Capital for 8 consecutive trading days, with a cumulative net Capital of approximately $1.2 billion, and the total net assets of the ETF decreased by about $8.8 billion, a rare situation since the launch of the U.S. Bitcoin spot ETF.
On the evening of September 9, Bitcoin stopped falling and recovered. At the same time, Sosovalue data showed that the daily net inflow of US spot Bitcoin ETFs turned positive, indicating that market sentiment has improved. However, Trading view's technical analysis shows that the market's sell signal is still strong.
Digital asset research platform 10x Research released a research report today, predicting that the price of Bitcoin will fall to $45,000. Bitcoin financial services platform NYDIG said Bitcoin investors should prepare for a “seasonal downturn” in September, “looking at history, September has been the worst on Medium .”
Grayscale Research's report indicates that the selling pressure from large market institutions has basically passed and Bitcoin fundamentals are improving, calling attention to the US Federal Reserve's interest rate cuts and political changes surrounding the crypto industry in the United States.
Onchain data shows risks are not yet fully resolved
Judging from multiple on chain indicators, market risk has not been completely eliminated, but the current position may be in the early stages of a bull market.
According to data from Glassnode, Bitcoin's 7-day moving Medium SOPR (the ratio of profits to spent outputs) has dropped below 1.0, which means that sellers in the market are still profitable in transactions on the blockchain, but it should be noted that history shows that SOPR often drops below 1.0 before the market stabilizes. The current decline is similar to the bear market period in 2018 and 2019. If SOPR remains below 1.0 for a long time, the market may reverse.
SOPR is used to XEM at the ratio between the USD value of a UTXO (UTXO is an unspent transaction output, i.e. the balance in a Bitcoin address) when it is created and the USD value when the UTXO is spent. The ratio of 0 is the Chia line. A ratio above 0 represents the total profit in transfers between wallets, and a ratio below 0 represents a loss-making sale.
Glassnode released a research report on September 4, pointing out that in terms of the ratio of floating profit to floating loss, the profit is still 6 times the total loss, and the ratio is higher than the current value at about 20% of trading days. Short-term holders (STH), who represent new market demand, bear most of the market pressure because their floating loss dominates the market and the loss margin has continued to increase in recent times. However, the size of the floating loss relative to the market value shows that the market has not yet entered a full-blown bear market, but is closer to the volatility period in 2019.
Based on on chain data showing key metrics such as seller risk ratio, Glassnode research suggests that market volatility could increase in the coming period.
According to data from Dune, the number of active Bitcoin addresses has dropped significantly compared to before this year's halving, which could indicate that market sentiment is cooling.
Based on this, 10x Research says Bitcoin could fall to $45,000 in this cycle. Markus Thielen, director of the research institute, said that after Bitcoin addresses peaked in November 2023, there was a sharp decline in the first quarter (Q1) of 2024. “Short-term holders started selling their BTC in April, while long-term holders took profits, suggesting that the market has reached the peak of the cycle.”
Dan Tapiero, founder and CEO of 10 T Holdings, said in an interview with X that based on historical performance, Bitcoin typically underperforms or experiences increased selling pressure in September of previous years.
Pay attention to the good news at the macro level
With the launch of crypto spot ETFs and the involvement of Wall Street investment funds, the crypto market trend and macro connection have increased.
Grayscale Research said in a report on September 3 that the selling pressure from the German government, Mt Gox Asset Management and other institutions has basically passed, and the improvement of the fundamentals is expected to improve. At the same time, the research report pointed out that investors need to pay special attention to the US labor market, the Federal Reserve's interest rate cuts and political changes in the United States surrounding the cryptocurrency industry.
The market generally expects the Federal Reserve to announce its first interest rate cut in September.
Overall, the interest rate cut is good news for risk assets. Boosted by the macro news, global risk assets and Bitcoin saw a short-term rally.
The Fed's next meeting is on September 18. The Fed is currently in a quiet period, and Fed officials will not publicly express their views on monetary policy unless there are special circumstances.
On September 6, the US Bureau of Labor Statistics released August statistics, showing that the number of non-farm jobs in the United States increased by 142,000, lower than expected, and the unemployment rate decreased by 3 basis points to 4.22%, stronger than the expected value of 3.7% and the previous value of 3.6%. Medium hourly wages in August increased by 0.4% compared to the previous month, higher than expected.
Eric Robertsen, chief global strategist at Standard Chartered, said the data was not enough to warrant a 50 basis point rate cut. Goldman Sachs believes that speeches by Fed Governor Waller and New York Fed President Williams show that Fed leaders believe a 25 basis point rate cut at the September meeting is the baseline expectation, but if the labor market continues to weaken, they are willing to XEM a 50 basis point rate cut at subsequent meetings.
Arthur Hayes, co-founder of BitMEX, wrote on X that the rate cut would not benefit Bitcoin in the short term because the reverse repurchase agreement (RRP) plays a regulatory Vai in this context. The current RRP yield is 5.3%, higher than the 4.38% yield on Treasury bonds. Hayes believes that the interest rate differential will cause large money market funds to shift Capital from Treasury bonds to RRPs, thereby reducing the amount of money available for riskier investments like cryptocurrencies.
Hayes also pointed out that market liquidation could become more constrained in the next two weeks before the rate cut actually takes place. “Bitcoin will fluctuate around current levels in the best case scenario, and slowly fall below $50,000 in the worst case scenario as funds are pulled out of Treasury bonds and back into the reverse repo program.”
Analysts at Bitfinex said that due to the stagnant price trend for months, crypto investors had expected the Federal Reserve's interest rate cut in September to boost the market, but growing recession concerns could bring a deeper correction. "If the easing cycle is accompanied by a recession, Bitcoin could fall 15%-20% after the September rate cut. Assuming that the BTC price was around $60,000 before the cut, the potential Dip would be between $40,000 and $50,000."
Reacting to the recent volatility in Bitcoin price, crypto OG ShenyufaX said he is “prepared to endure another 16-19 months.”
Investor Ni Sen @Phyrex_Ni said on X that he was in no rush to comment on Shenyu's comments. "If there is indeed a final cut, it will likely come in a recession... 16-19 months should be the Medium Fed rate cut cycle. After this cycle, if the economy is in recession, it will enter a liquidation easing phase."
Ni Sen believes that the fourth quarter of 2024 and the first quarter of 2025 could usher in a wave of opportunities for Bitcoin for four reasons:
While the rate cut is not QE, fund activity in the market is expected to increase;
Presidential election, in which several presidential candidates openly supported cryptocurrencies and made promises
The BTC halving effect has not been proven to not happen yet;
The new version of FASB will take effect in December 2024. At that time, cryptos can apply fair accounting standards and perform financially reasonable valuations.
Notably, on April 19, 2024, Bitcoin will undergo its fourth halving. In the past, Bitcoin prices have often risen after halvings, but this time the market is quite special. On the day of the halving, Bitcoin prices fell instead of rising, and the performance was not as expected, leading to market comments that the Bitcoin halving effect may not be effective.
Grayscale Research said this Bitcoin halving is different from previous ones. The price surge that occurred before the halving was related to changes in on-chain activities such as Ordinals and ETF Capital .
