forbes.com
Bitcoin prices took a tumble today, falling close to 8% in less than 24 hours as markets responded to several bearish variables including lackluster jobs data.
The world’s most prominent digital currency dropped to $52,530 around 5 p.m. EST, according to Coinbase data provided by TradingView.
At this point, the cryptocurrency was down approximately 7.8% after rising to nearly $57,000 earlier in the day, additional Coinbase figures pulled from the same source reveal.
Since falling to roughly $52,500, the digital asset has bounced back somewhat, trading close to $53,800 at the time of this writing. However, the cryptocurrency has failed to recoup most of the losses it suffered today.
Multiple Causal Factors
When asked to explain these latest price fluctuations, analysts pointed to several developments.
“Bitcoin’s price action continues to be in a downtrend, attributing to a combination of macroeconomic factors, underwhelming ETF flows, and seasonality effects,” Jacob Joseph, senior research analyst at CCData, said via emailed comments.
He pointed to the latest U.S. jobs data, which showed that the nation’s economy created 142,000 net positions in August, according to a Labor Department news release.
“Recent revisions to job data indicate a weaker labour market than previously thought, raising fears about economic slowdown,” he stated.
“This has led to risk aversion among investors, causing them to shy away from riskier assets like Bitcoin,” Joseph added.
Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management, also weighed in on the key role that this development played in the downward movement the cryptocurrency experienced today.
“The sell off was started by the recent jobs report, which is causing investors to wonder about the state of the economy and if we’re heading into a recession,” he stated via comments submitted through email.
All Eyes On The Fed
In spite of the bearish impact today’s jobs data had on bitcoin, the figures could cause Fed officials “to be much more dovish and lower rates this month,” Sifling stated, emphasizing the frequently repeated sentiment that “Lower rates have historically been seen as a positive development for Bitcoin.”
Several other market observers highlighted how the lackluster jobs figures could potentially impact the decision making of these government officials.
Tim Enneking, managing partner of Psalion, spoke to this via email, stating that “the cuts will almost certainly total 75-100 bps this year (which is quite rapid) and the US (and global) economy looks to be set for a soft landing.”
Seasonality
Recently, the cryptocurrency markets have been impacted by the specific time of the year, Joseph emphasized, stating that “the seasonality effects in the summer have slowed down the inflow of capital to the ETFs, leading to a lack of fresh capital to support Bitcoin’s price.”
Over the next several weeks, the digital asset could experience further weakness, at least if bitcoin experiences performance this September that is similar to previous years.
“Historically, since 2010, Bitcoin's average returns in September have averaged -4.51%, making it the worst-performing month on record, contributing to negative expectations,” the analyst noted.
“Moreover, the market is more likely to be risk averse entering a period of catalysts that can induce high volatility; with the US Presidential Election debate on Sept 10th, CPI and FOMC decision on the 12th and 20th,” he added.
Meanwhile, bitcoin has been experiencing lackluster demand over the last several months, Julio Moreno, head of research for CryptoQuant, noted via Telegram.
He provided the chart below, which illustrates these developments:
Uncertain Outlook
While analysts were able to create a consensus regarding the key impact that monetary policy will likely have on bitcoin markets going forward, they offered varying takes on how the digital currency will behave going forward.
“We’re in a transition period right now, though, with no clear bullish drivers for the BTC price, especially since the furor over the spot BTC ETFs is over, and the price is drifting lower,” said Enneking.
“Now that $56k, the mid-August low, has fallen, there’s some decent support at $54k, but if that doesn’t hold (and, as of right now, it doesn’t look good), we risk dropping to the early August low of $49k,” he stated.
Greg Magadini, director of derivatives for digital asset data provider Amberdata, provided a different take.
“Bitcoin’s price will probably continue to range in the $55-65k band for a while longer,” he stated via email.
“It could touch the high 40’s, which would be a great buy opportunity but not a concern,” Magadini added.
“Bitcoin price is poised to continue a run up from the $16k bear market lows over the next 12-18 months given rising global liquidity, $16bn being issued in cash to FTX creditors, and a fiscal environment which favors asset prices.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and SOL.