After a quiet weekend, last week’s volatility was blown away as crypto markets returned to “business as usual”. Bitcoin stands in familiar territory, but without a trend, traders and analysts remain undecided on their next move. With the network fundamentals preparing to consolidate their recent gains and macro markets calm, the question of whether September 2023 will be a classic single-digit loss month for BTC/USD has started to be discussed. The main factors affecting the BTC price action in the coming days have been determined. Here are the details…
Bitcoin price smashed BTC shorts over the weekend
Bitcoin offered few surprises in weekend out-of-hours trading – which could only continue as US stock markets open on Sept. BTC/USD has moved within a tight $200 corridor for most of the last two days, but modest gains to the upside and downside have denied the existence of speculative stock market players, according to the data. These were spotted by popular trader Skew, who uploaded his order book data showing that failed shorts were behind Bitcoin’s short trips to over $26,000. Part of the X comment read, “All it took was for someone to find where the stops were and the market bought a few million on the spot and then dumped some shorts after pushing.”
Additional BTC spot market analysis questioned whether the weekly close around $25,970 would result in a plan to give the bulls a false sense of security. $25,900 for Skew was already on the radar as the level to hold at the weekly candle close. However, for fellow trader and analyst Rekt Capital, anything below $26,000 was a cause for concern on longer timeframes. He warned over the weekend that if this level is not retracted, the double top structure for 2023 will be at risk and the area around $31,000 will be the BTC price ceiling and the downside movement will take a long time.
bitcoinFed speakers head off macro week
A quiet macro week is a potential source of relief for risk asset investors. For the US, the next four-day week contains little in terms of key macroeconomic data and instead the Fed itself is in focus. As we reported on Kriptokoin.com, various top Fed officials will make comments on the state of the economy this week, ahead of September 19, when the most important interest rate decision of the month will be taken. Among them are Atlanta Fed President Raphael Bostic and New York Fed President John Williams. “It’s a short week, but it’s all about the Fed,” summarized financial commentary resource The Kobeissi Letter in X, along with the main daily dates for the days ahead.
He added that Fed policy was “still far from clear” ahead of the rate decision. Bitcoin has become less sensitive to Fed comments over the summer, with even Fed Chairman Jerome Powell failing to significantly influence BTC price action. Still, the words used by officials may upset market expectations of what will happen in the Fed’s war on inflation. At the time of this writing, markets were overwhelmingly expecting interest rates to stay the same in September, with 93% certainty, according to data from CME Group’s FedWatch Tool.
Bitcoin mining declines from highs
After hitting an all-time high two weeks ago, Bitcoin mining difficulty is down to earth. With modest consolidation, the difficulty is expected to drop by around 2.4% in the automatic recalibration on September 5. This is not unusual by historical standards, especially in light of the 6.5% increase seen in mid-August – an increase that comes despite BTC price action going the other way. When analyzing the potential cause, James Straten, research and data analyst at crypto analytics firm CryptoSlate, pointed to a concomitant decrease in Bitcoin miners’ BTC stocks.
In part of the X comment over the weekend, “This coincided with the miner balance decreasing by about 4k BTC. In particular, it comes from F2Pool, whose BTC balance has halved.” Straten added that any decline in BTC price performance could increase the trend in F2Pool, causing additional miner stress. “If Bitcoin suffers another drop, we could probably see another miner capitulation,” he warned. CryptoQuant contributor IT Tech reacted by citing the correlation between “small” BTC price drops and miners sending BTC to exchanges. A quote from recent comments said, “This action certainly increased the selling pressure and eventually led them to sell in the market.” IT Tech explained that BTC sales were modest but occurred at the “worst moments”.
Idle BTC supply breaks new records
Behind the scenes, Bitcoin supply is increasingly being owned by long-term holders. The latest data from on-chain analytics firm Glassnode reveals several new records regarding BTC being locked in long-term storage. The percentage of mining supply that has now been idle for three years or more is 40,538%, the highest ever. The equivalent metric for coins that have been stable in wallets for at least five years is now 29.637%. So similarly a new record. The supply shrinkage is a welcome sight for Bitcoin bulls who conclude that any future demand for BTC will have buyers competing for a smaller amount of supply.
In a recent analysis, Straten also noted that Bitcoin speculators, often referred to as short-term holders, have already distributed BTC to the market. “Once again, Bitcoin short-term holders delivered at a loss about 20,000 BTC sent to exchanges,” he wrote over the weekend. “The fourth highest amount this year. This will continue to contribute to the record gap between the supply of long-term holders and short-term holders,” he added. Accompanying Glassnode data showed the volume of BTC sent to exchanges at a loss by short-term holders.
Interest returns to 2020
Bitcoin hasn’t been much of a mainstream conversation topic for the average non-crypto consumer this year, and Google Trends data proves it. Normalized search interest has returned to the levels seen before BTC/USD surpassed the 2017 all-time high of $20,000 in late 2020. Search activity is heavily correlated with BTC price action, and the absence of notable upside events during Q2 seems to have contributed to the steady mainstream interest.
Meanwhile, the average investor in crypto is scared. According to the Crypto Fear and Greed Index, a sentiment indicator, it is “fear” that currently characterizes the overall market mood. The index is 40/100, in a region it has been familiar with since mid-August, when Bitcoin fell 10%.
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