The bullish momentum that drove Bitcoin to a 56.4% year-to-date gain has disappeared, as the Bitcoin price lost 13% in August. Despite the positive outcome for Grayscale against the SEC, the gains have vanished.
Analysts are comparing the current BTC market to the pre-bull market cycle of 2015-2017 due to the contraction in Bitcoin’s price.
Let’s delve into the factors affecting the Bitcoin price today.
Bitcoin investor sentiment stalls
In the beginning of 2023, short positions were dominating liquidations in the futures market. On August 17, over $213.5 million of longs were liquidated, catching bulls off guard. This marked the largest single day of Bitcoin long liquidations since the Terra Luna collapse in May 2022.
Long liquidations continued throughout August, with $41.7 million liquidated in the 24 hours preceding September 1. When BTC longs are liquidated without buying pressure from trading volume, the Bitcoin price is negatively affected. Bitcoin volume has also reached its lowest levels since early 2021, with BTC Ordinals volume down over 98%.
The absence of consistent trading volume has caused the Fear & Greed Index, a key investor sentiment gauge, to trend downwards in the last 30 days, shifting from neutral sentiment to fear.
While short-term uncertainty exists in the crypto market, institutional investors’ long-term outlook does not appear to have changed. Despite the hostile U.S. regulatory environment, large institutions are pushing for Bitcoin financial instruments, which may trigger a bull run. Grayscale directly urged the SEC to approve all Bitcoin ETFs. However, the SEC’s delay in approving Bitcoin ETFs, including BlackRock’s application, until 2024, could negatively impact investor sentiment and price action in the crypto market.
Bitcoin options markets continue to surge
Bitcoin’s market structure has been recovering since the beginning of 2023, but recent price action has turned the market structure bearish. Despite the surge in Bitcoin open interest, there is a lack of consolidation above $27,000, leading some analysts to believe that the BTC price may drop to $23,000.
If the price drops to the key level of $24,750, the bullish momentum will be completely erased.
Some investors have speculated that BlackRock may be suppressing the Bitcoin price ahead of its eventual ETF launch, but this argument seems to be a conspiracy theory, as BlackRock has more to lose from a BTC price crash.
Despite the current downturn in Bitcoin’s price, Pantera Capital believes that BTC could reach $148,000 by July 2025.
Will short-term pain in macro lead to long-term gains in crypto?
The Bitcoin price is still directly influenced by macroeconomic events, and it is likely that further regulatory actions and interest rate hikes will continue to have some effect on the BTC price. Even after China’s ruling that virtual assets are legal property on September 1, the Bitcoin price continued to drop.
Federal Reserve Chairman Jerome Powell’s recent speech in Jackson Hole, Wyoming indicated that the Fed will maintain aggressive interest rate policies to tackle inflation.
In the long term, market participants still expect the price of Bitcoin to recover, especially as more financial institutions embrace BTC.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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