Key Takeaways:
- The euphoria from Grayscale’s win against the SEC wore off.
- Macro factors capping Bitcoin’s bullish attempts remain strong.
- The BTC trading volumes remain at three-year lows, anticipating a push.
YEREVAN (CoinChapter.com) — Bitcoin price started the Aug 30 Tokyo trading session with a 1.3% slide, correcting down to just below $27,500 as of 06:00 GMT.
Notably, the correction came after a near-10% advance on Aug 29, inspired by Grayscale’s victory in court against the US Securities and Exchange Commission (SEC), with markets elated on the possible implications for Bitcoin spot ETF filings waiting for the SEC’s review.
Meanwhile, although several on-chain factors could propel the Bitcoin price further by 2024, the immediate headwinds persist, arresting the upside attempts.
Bearish macro-factors in Bitcoin’s way
With a market cap north of $530 billion, Bitcoin is vulnerable to unfavorable macroeconomic conditions.
For example, the Evergrande fiasco in China sent the BTC price tumbling in mid-August. The Chinese construction giant’s default and the subsequent economic loss pressured global investors to cut involvement in Chinese real estate and focus more on safer options that exclude China.
This change in attitude created conditions where the crypto investment volume also fell. Thus, Bitcoin may have gotten caught in the crossfire of these economic developments.
Less liquidity – less risk on investments
Additionally, the ubiquitous lack of liquidity in the markets played its role. As previously reported, central banks globally tightened their purse strings, cutting down on spending.
The Fed, European Central Bank (ECB), Bank of England (BOE), People’s Bank of China (PBC), and other key players reduced their balance sheets by 3-5.5% in attempts to further reduce inflation to the desired 2% mark.
Moreover, during the Jackson Hole speech on Aug 25, Fed Chair Jerome Powell asserted that the possibility of another interest rate hike remains on the table, which means a reduced-risk policy for institutional and retail investors alike.
The shrinking stablecoin market confirmed the investors’ more cautious approach. Generally, stablecoins are considered the intermediary assets between leading cryptos, such as Bitcoin and Ethereum, and the fiat economy. Thus, the diminishing market cap could signify a departure from the crypto sector as a whole.
Bitcoin trading remains low – markets in anticipation of a catalyst
Moreover, according to on-chain metrics data from CryptoQuant from Aug 26, Bitcoin trading volumes sat at their lowest since 2019. Considering both spot and derivatives exchanges, the total trading volume of Bitcoin on all exchanges stood at 129,307 BTC, as opposed to the March high of 3.5 million BTC, a plunge of about 94%.
Julio Moreno, head of research at CryptoQuant, told CNBC that the departure is consistent with any bear market.
Trading volumes decrease in bear markets as retail investors leave. This happened during 2022 on most exchanges. As we progress further into a bull market, the trading volume may continue to pick up.
he asserted.
The low volumes are not necessarily bearish, as they could signify traders’ inclination to HODL rather than exchange. However, the markets might be waiting for an additional nudge after the low volatility season.
Bernstein analyst Gautam Chhugani agreed that the pending spot ETF approvals and the Bitcoin halving in April 2024 could be the necessary catalysts. Until then, the markets could remain dormant.
Overall, [the] market remained dull, waiting for a new catalyst, and the overall market liquidity remained scant. This market is not necessarily bearish, but the participants remain disinterested to trade, as the market waits for catalysts.
he noted.
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