The crypto market has slipped into the red zone today, accompanied by the price of the leading cryptocurrency Bitcoin. Different factors played a role in this background. The ‘rug-pull’ incident in an altcoin project on Coinbase’s BASE Blockchain was one of them. Also, CRV liquidations have affected investors’ confidence in altcoins.
Bearish warning for BTC price!
As you follow on Kriptokoin.com, Bitcoin has gained 75% since the beginning of the year. This bullish momentum was lost on August 1 as the BTC price closed the month with a 5.4% drop in July. Meanwhile, Bitcoin price briefly dropped below $29,000 on July 31. It remained below this key resistance level for a while. The drop in its price has caused some analysts to warn that BTC risks falling to $25,000.
BTC/USD 1-day price. Source: TradingViewFactors affecting bitcoin price
BTC’s market structure is on the decline
According to independent market analyst Charles Edwards, Bitcoin’s market structure has been bullish for the past few months. However, recent price movements have turned the market structure bearish in a shorter time frame.
Bitcoin chart highlighting news events. Source: Capriole InvestmentsEdwards underlines the recent divergence in the correlation between the S&P 500 and Bitcoin price. In this context, “During the decline of Bitcoin, the S&P 500 experienced the longest streak in recent years. In addition, the Fed essentially halted rate hikes, currently the tightest monetary policy regime on record.” says. Edwards continues to highlight new key Bitcoin price support levels. These range from $28,000 to $26,000 to $20,000.
CME’s FedWatch: Fed will pause interest rate hikes
Federal Reserve Chairman Jerome Powell did not make a definitive statement on the September 20 interest rate decision. However, the market seems to believe that the Fed will stop the rate hikes again. CME’s FedWatch tool shows overwhelming market belief that such increases will come at the next FOMC. As of August 1, the probability of a break in interest rates stands at 81.5%.
Target interest rate probabilities. Source: CME GroupCrypto investor sentiment continues to decline
Since July 31, over $20 million in Bitcoin long positions have been liquidated. When BTC long positions are liquidated without buying pressure from trading volume, the Bitcoin price is negatively affected. Bitcoin volume hit the lowest levels since the beginning of 2021.
BTC liquidations. Source CoinglassThe lack of new volume has caused the Fear and Greed Index, a key investor sentiment indicator, to plummet since early July. Despite starting July with a feeling of “greed,” the index is currently showing neutral market sentiment.
Fear and Greed Index. Source: Alternative.meProtocol exploits and loss of investor funds
The Curve scenario brought the risk of contagion to the DeFi and crypto industry. In addition, the BALD developer’s claim for Coinbase’s tier 2 BASE is likely also influencing investor sentiment. The theft of investor funds came just before the SEC filed a July 31 complaint against Hex founder Richard Heart for using more than $12 million in investor funds to purchase high-end luxury items, including a 555-carat diamond. Over the weekend, Coinbase CEO Brian Armstrong claimed that the SEC had requested the delisting of all cryptos except Bitcoin. Coinbase and the SEC denied this accusation.
Short-term pain, long-term gain?
The short-term uncertainty in the crypto market does not seem to have changed the long-term perspective of institutional investors. Recently, despite a hostile US regulatory environment, major institutions have been pushing for Bitcoin financial instruments that could trigger a bull run. Grayscale directly called on the SEC to approve all Bitcoin ETFs.
Meanwhile, Bitcoin price continues to be directly affected by macroeconomic events. It is also likely that further regulatory action and interest rate hikes will continue to have some impact on the BTC price. Markus Levin, co-founder of XYO Network, comments on the current Bitcoin price movements:
It is not surprising that Bitcoin is on the decline these days when we live in the last days of summer. Volumes have dropped. Individual traders generally do not enter the crypto markets. The macro backdrop with relatively high interest rates clearly plays a role here. But I should point out that we’re in a part of the four-year cycle where this kind of apathy isn’t all that surprising. We’ve come out of the boom phase and are clearly in the frustration phase.
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