AUS
NZ
UK
CA
USA
IND
Bitcoin has dropped more than 10% over the past two weeks, with its price falling from $64,190 to $57,800 as of September 3. This decline comes despite the S&P 500 index being just 2% shy of its all-time high and gold trading close to its historical peak. The recent downturn in Bitcoin’s price reflects a combination of factors beyond just macroeconomic conditions.
Market sentiment has been influenced by growing concerns about a potential US recession. Despite some traders focusing on the Federal Reserve’s monetary policy and the performance of the US dollar, {Bitcoin} (BTC) has struggled to gain traction. The expectation of a more accommodative Federal Reserve, which could involve lowering interest rates, has been part of the broader narrative impacting Bitcoin’s market.
In the past two weeks, investors have shown a preference for safer assets, with the 2-year Treasury yield falling from 4.06% to 3.88%. This shift suggests that investors are willing to accept lower returns in exchange for perceived safety. The labor market also reflects some uncertainty, with July’s unemployment rate rising to 4.3% and ongoing concerns about job growth.
The Consumer Price Index (CPI) slowed to 2.9% in July, the lowest rate since March 2021, which has reduced inflationary pressures. However, rising jobless claims could impact the likelihood of significant interest rate cuts by the Federal Reserve. The market currently anticipates a 74% chance that FOMC rates will drop below 4.50% by December 18.
Bitcoin’s underperformance relative to other markets, such as the Russell 2000 index, is also partly attributed to outflows from spot Bitcoin exchange-traded funds (ETFs). Between August 27 and August 30, these ETFs experienced $480 million in net outflows, which countered the previous $455 million in inflows. Persistent outflows from ETFs can generate negative sentiment and make investors wary of Bitcoin’s short-term prospects.
Additionally, declining miner profitability has contributed to market concerns. Bitcoin miners, who currently hold over 1.8 million BTC, are facing lower profitability levels. The hashrate index, which measures earnings from mining power, has dropped to $42 per petahash per day from $48 two months ago. This decline raises fears that miners might need to sell their holdings to cover costs, further impacting Bitcoin’s price stability.
