Article written in collaboration with Ryan Lee, Chief analyst at Bitget Research
The BTC price briefly rose from $56,000 to $57,000 before rapidly dropping, losing $4,000 in a short time and hitting the support level at $53,000.
Main reasons for the BTC drop
The recent decline in Bitcoin can be attributed to several interconnected factors. The first is linked to the release of macroeconomic data, particularly on employment. On September 6 (U.S. local time), the U.S. released the seasonally adjusted non-farm payrolls data for August, showing 142,000 jobs added, below the expected 160,000. The unemployment rate for August was 4.2%, meeting expectations, and better than the previous value of 4.3%. The non-farm payrolls and unemployment data exceeded expectations, which affected market predictions for the Federal Open Market Committee (FOMC) to cut interest rates. The probability of a major economic downturn in the U.S. seems low, and the likelihood of a 25 basis point rate cut has increased. Meanwhile, the U.S. Dollar Index slightly rebounded, the 10-year Treasury yield rose, and both gold and BTC prices came under pressure.
Meanwhile, net outflows from Bitcoin ETFs have exacerbated this downward trend. On the last trading day of last week, BTC spot ETFs saw a total net outflow of $170 million, marking eight consecutive days of capital outflows. The eight-day net outflow from BTC ETFs has led to a price drop from $64,000 to $53,000, with the outflow of funds having a clear impact on the price decline.
Finally, the continuous price drop of BTC, from $64,000 to $53,000 over two weeks, has negatively affected market sentiment. "Extreme fear" in the market has intensified, and traders are adopting a wait-and-see attitude, leading to a severe lack of buying power.
What to expect next
Regarding this week, the upcoming CPI data is worth watching, and it is expected to fall within a reasonable range. If BTC ETFs see a reversal to net inflows, we could witness a rebound in BTC during the week, with an expected price fluctuation range between $53,000 and $60,000.
For the following months, other factors need to be considered. If the Fed's rate cuts successfully stimulate economic growth, the recent downturn could create potential for quantitative easing and increased momentum toward the year-end, with the U.S. election providing additional opportunities.
The US elections, introducing a certain level of uncertainty into the market, could also have an impact on the price of Bitcoin. Historically, certain remarks and measures during election periods have stimulated economic growth, which is generally favorable to the market, especially for risk assets. Trump has repeatedly expressed support for cryptocurrencies in public forums, and his pro-crypto statements during the high-profile election season could further boost BTC's price. However, the long-term impact will depend on the overall market environment and policy direction.
To conclude, Glassnode data shows that long-term BTC holders continue to increase, suggesting that despite any short-term declines, long-term holders are accumulating more, and the future of the crypto market and BTC’s price trajectory remains promising.
