The bullish momentum that propelled Bitcoin (BTC) to a 56.4% year-to-date gain has all but vanished as Bitcoin price lost 13% to close out the month of August. Bitcoin price seemingly had bullish momentum after the Grayscale court victory against the SEC, but these gains have evaporated.
The contraction in Bitcoin price has some analysts comparing the current BTC market to the pre-bull market cycle of 2015-2017.
Let’s take a closer look at the factors impacting Bitcoin price today.
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Bitcoin investor sentiment stalls
The start of 2023 saw traders with short positions continually dominating liquidations in the futures market. Bulls were caught off-guard on Aug. 17 when over $213.5 million of longs were liquidated. This marked the largest single day of Bitcoin long liquidations since the Terra Luna collapse in May 2022.
Long liquidations continued to close out August with $41.7 million liquidated in the 24-hours proceeding Sept. 1.
When BTC longs are liquidated without buying pressure from trading volume, Bitcoin price is negatively affected. Bitcoin volume has also hit the lowest levels since early 2021 and BTC Ordinals volume is down over 98%.
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The absence of consistent trading volume has sent the Fear and Greed Index, a key investor sentiment gauge, into a downtrend in the last 30-days switching from neutral sentiment to fear.
The short-term uncertainty in the crypto market does not appear to have changed institutional investors’ long-term outlook. Despite a hostile U.S. regulatory environment, large institutions are pushing for Bitcoin financial instruments which may spark a bull run. Grayscale directly urged the SEC to approve all Bitcoin ETFs.
Despite the urgency of major financial firms, Bitwise has officially withdrawn their Bitcoin and Ether ETF applications. The SEC seems poised to continue to delay decisions on approving Bitcoin ETFs, including BlackRock’s application, until 2024 and this could be negatively impacting investor sentiment and price action across the crypto market.
Bitcoin option markets continue to surge
Bitcoin’s market structure has been recovering since the start of 2023, but its recent price action has turned the market structure bearish. Despite the surging of Bitcoin open interest, there is a lack of consolidation above $27,000 and some analysts believe BTC price is on the road to $23,000.
If the downward surge hits the key $24,750 level, the bullish moment will be entirely erased.
Related: Bitcoin metric with ‘100% long hit rate’ predicts $23K BTC price floor
While some investors have speculated that BlackRock may be suppressing Bitcoin price ahead of their eventual ETF launch, the argument seems to be a conspiracy as they have more to lose from a BTC price crash.
Despite the current Bitcoin price downturn, Pantera Capital believes BTC could hit $148,000 by July 2025.
Will short term pain in macro lead to long-term gains in crypto?
Bitcoin price continues to be directly impacted by macroeconomic events, and it is also likely that further regulatory actions and interest rate hikes will continue having some effect on BTC price. Even as China ruled that virtual assets are legal property on Sept. 1, Bitcoin price continued to drop.
Federal Reserve Chairman Jerome Powell also gave a speech on Aug. 25 in Jackson Hole that provided insight that the Fed will continue with aggressive interest rate policies for as long as it takes to tamp down inflation.
In the long term, market participants still expect the price of Bitcoin to recover, especially as more financial institutions are seemingly embracing 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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