The price of leading crypto Bitcoin fell today as the crypto market looked for reasons for a relief rally. Since BTC is dominant in the market, it naturally affects altcoins with the factor that affects it. As a matter of fact, altcoin projects have mostly followed their leaders today. Crypto expert Kyle White looks at the background of this drop.
Bitcoin is losing its bull momentum this year!
As you follow on Kriptokoin.com, the bull momentum pushed Bitcoin (BTC) to a 57.8% year-to-date gain. However, the Bitcoin price has fallen by 9.1% in the last 7 days. Thus, that momentum has completely vanished this week. Bitcoin price continues to trade below the 20-week exponential moving average of $27,750, a critical level that needs to be recaptured to restart any appearance of bullish momentum. The contraction in BTC price has caused some analysts to compare the current BTC market to the pre-bull market cycle of 2015-2017.
BTC 1-day price. Source: TradingViewFactors affecting BTC and altcoin prices today
Bitcoin investor sentiment stalls
At the start of 2023, traders with short positions consistently dominated liquidations in the futures market. The bulls were caught off-guard with the liquidation of over $213.5 million longs on August 17. This marked the biggest single day of Bitcoin long liquidations since the Terra Luna crash in May 2022.
Long liquidation on BTC futures. Source: GlassnodeWhen BTC long positions are liquidated without buying pressure from trading volume, the Bitcoin price is negatively affected. Bitcoin volume has also reached its lowest levels since the beginning of 2021. Also, BTC Ordinals volume dropped over 98%. The lack of consistent trading volume has put the Fear and Greed Index, a key investor sentiment indicator, into a downtrend from neutral sentiment to fear over the past 30 days.
Fear and Greed Index. Source: Alternative.meRegulatory uncertainty prevails in the market
The short-term uncertainty in the crypto market does not seem to have changed the long-term perspective of institutional investors. Despite a hostile US regulatory environment, major institutions are pushing for Bitcoin financial instruments that could trigger a bull run. Grayscale directly called on the SEC to approve all Bitcoin ETFs.
Despite the urgency of major financial companies, it looks like the SEC will continue to delay their decision to approve Bitcoin ETFs until 2024. It is possible that this situation will negatively affect investor sentiment and price movements in the crypto market.
Bitcoin options continue to rise
Bitcoin’s market structure has been on a recovery path since the beginning of 2023. However, the recent price action has turned the market structure bearish. Despite growing interest in BTC, there is a lack of consolidation above $30,000. The rise in open interest is leading some analysts to believe a sharp correction to $29,000 is possible.
Some investors argue that BlackRock has suppressed the price of Bitcoin ahead of the eventual ETF launch. However, they have more to lose from the fall in BTC prices. That’s why this argument looks more like a conspiracy. Despite the current Bitcoin price drop, Pantera Capital predicts that BTC will reach $148,000 by July 2025.
Will short-term pain in macro lead to long-term gains in crypto?
Meanwhile, Bitcoin price continues to be directly affected by macroeconomic events. It is also likely that further regulatory action and interest rate hikes will continue to have some impact on the price of BTC and altcoins. This caused crypto VC entries to drop by 10.26%.
Federal Reserve Chairman Jerome Powell will deliver a speech in Jackson Hole on August 25. Powell’s speech will give an idea about whether the Fed will continue with its aggressive interest rate policies. Brian D. Evans, CEO of BDE Ventures, has this to say on how macro events will affect Bitcoin price:
Economic growth is still relatively stable, although there are signs of weakness. Inflation is clearly falling. And central banks are clearly willing and ready to provide massive amounts of liquidity to support faltering banking systems and stimulate faltering economies. So, I suspect we’re going to experience a prolonged horizontal volatility. And when the market finally gets its next foot up, permabears will once again be stuck on the sidelines.
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