Bitcoin price fell 4.1% from September 15 to 16, falling to $57,595 after failing to break above the $60,000 resistance level. The drop wiped out gains from September 13, when Bitcoin price rose from $57,890 to $60,580 in less than 10 hours.
Some analysts have attributed Bitcoin’s recent price surge to a weakening US dollar, coinciding with gold hitting record highs. Others, meanwhile, have argued that $263 million in inflows into Bitcoin exchange-traded funds (ETFs) and MicroStrategy’s recent purchase of $1.11 billion in BTC fueled the rally on September 13.
Despite these factors, Bitcoin has struggled to break above $62,000 for nearly three weeks, making bullish traders more cautious. With the U.S. Federal Reserve expected to ease some of its contractionary monetary policy by cutting interest rates, traders have little incentive to take aggressive positions ahead of the event.
A 0.50% interest rate cut at the Federal Open Market Committee (FOMC) meeting on September 18 would benefit risk markets, but investor focus on stocks could dampen Bitcoin’s rally. The S&P 500 is currently trading just 1% below its record high, and major tech companies continue to report strong earnings while holding cash, which supports stock prices through share buyback programs.
However, if the Fed opts for a more conservative rate cut of just 0.25%, it could have a negative impact on risk markets. Higher Capital costs for businesses and consumers could curb hiring and spending, which could reduce corporate profits and exacerbate challenges in the struggling commercial real estate market.
China’s economic outlook is also a concern for investors and has weighed on Bitcoin prices. Data released on September 14 showed that China’s retail sales rose just 2.1% year-on-year in August, down from a 2.7% increase in previous months. Similarly, China’s industrial production rose 4.5% in August, down from a 5.1% year-on-year increase in July.
“Both the long-term issues related to real estate prices and the short-term issues related to domestic demand […] are not good,” Eswar Prasad, professor of international trade and economics at Cornell University, told CNBC. Prasad warned that China’s economic outlook for the second half of this year is now “almost in the red.”
Therefore, in the short term, Bitcoin prices face significant risks due to macroeconomic factors. However, it can be argued that Bitcoin will eventually recover, as the cryptocurrency acts as an independent financial system and a hedge against potential government actions to stimulate the economy through monetary expansion. On the other hand, during times of uncertainty, traders often seek refuge in short-term US government bonds, gold, and cash.
Despite positive inflows into Bitcoin direct exchange-traded funds and continued strong demand from MicroStrategy, two recent events have negatively impacted investor sentiment. According to Sani, an on-chain analyst and founder of TimeChainIndex, a Bitcoin address that had been inactive for nine years transferred 211.3 BTC to the Kraken exchange on September 15. The transaction, worth $12.7 million, indicates selling activity from long-term holders.
Additionally, investor sentiment was hit after the U.S. Securities and Exchange Commission (SEC) expanded its case against Binance by expanding its case against the cryptocurrency exchange. The SEC has now classified Token such as Axie Infinity (AXS), Filecoin (FIL), and Cosmos (ATOM) as unregistered securities and claimed that Binance failed to provide sufficient disclosures.
Finally, in addition to macroeconomic uncertainty, increased regulatory risks surrounding the largest cryptocurrency exchange have further dampened investor interest in Bitcoin.
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Stone Sanh
According to Cointelegraph
