The bullish momentum that propelled Bitcoin to a 56.4% year-to-date gain has all but vanished, as the Bitcoin price lost 13% to close out the month of August. Bitcoin’s price seemingly had bullish momentum after the Grayscale court victory against the United States Securities and Exchange Commission (SEC), but these gains have evaporated.
The contraction in Bitcoin’s (BTC) 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 the 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, the 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 & 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Despite the urgency of major financial firms, Bitwise has officially withdrawn its Bitcoin and Ether (ETH) ETF applications.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 options 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 the 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.
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While some investors have speculated that BlackRock may be suppressing the Bitcoin price ahead of its eventual ETF launch, the argument seems to be a conspiracy, as it has 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?
The 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 the BTC price. Even as China ruled that virtual assets are legal property on Sept. 1, the Bitcoin price continued to drop.
Federal Reserve Chairman Jerome Powell also gave a speech on Aug. 25 in Jackson Hole, Wyoming 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.
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