Bitcoin’s price is currently experiencing a downturn, with the initial enthusiasm generated by Grayscale’s victory over the SEC giving way to disappointment after the SEC decided to delay the approval of various spot Bitcoin ETF applications.
The bullish momentum that fueled Bitcoin’s impressive 56.4% year-to-date gain has dwindled, as the cryptocurrency saw a 13% decline to conclude the month of August. While Bitcoin initially appeared to gain traction following Grayscale’s court victory against the United States Securities and Exchange Commission (SEC), these gains have since dissipated.
This contraction in Bitcoin’s price has prompted some analysts to draw parallels between the current market conditions and the pre-bull market cycle of 2015-2017.
The year 2023 witnessed a trend in which short positions consistently dominated liquidations in the futures market. On August 17, over $213.5 million worth of long positions were liquidated, marking the largest single-day Bitcoin long liquidation since the Terra Luna collapse in May 2022.
The trend continued into the end of August, with $41.7 million liquidated in the 24 hours leading up to September 1st. When Bitcoin longs are liquidated without corresponding buying pressure from trading volume, it exerts a negative impact on the Bitcoin price.
Adding to the concerns, Bitcoin’s trading volume has plunged to its lowest levels since early 2021, with BTC Ordinals volume dropping over 98%. The lack of consistent trading volume has pushed the Fear & Greed Index, an essential gauge of investor sentiment, into a downtrend over the past 30 days, shifting from neutral to fear.
Despite short-term uncertainties in the cryptocurrency market, institutional investors appear to maintain a positive long-term outlook. Large institutions are actively advocating for Bitcoin financial instruments, which could potentially ignite a bull run. Grayscale, for instance, has directly urged the SEC to approve all Bitcoin ETFs.
However, the SEC’s ongoing delays in approving Bitcoin ETFs, including BlackRock’s application, until 2024, have possibly dampened investor sentiment and impacted price action across the crypto market.
Bitcoin’s market structure had been on the mend since the start of 2023, but recent price movements have cast a bearish shadow. Despite surging Bitcoin open interest, a lack of consolidation above $27,000 has led some analysts to speculate that Bitcoin’s price could head towards $23,000.
If the critical support level at $24,750 is breached, any remaining bullish momentum could evaporate entirely.
While rumors have circulated that BlackRock might be suppressing the Bitcoin price ahead of its eventual ETF launch, such claims appear speculative, as the firm has more to lose from a Bitcoin price crash.
Despite the current downturn, Pantera Capital believes that Bitcoin could reach $148,000 by July 2025.
Bitcoin’s price continues to be influenced by macroeconomic events, and regulatory actions and interest rate hikes are expected to have an ongoing impact on the cryptocurrency’s price. Even as China declared virtual assets as legal property on September 1st, the Bitcoin price continued to decline.
Federal Reserve Chairman Jerome Powell’s remarks on August 25th in Jackson Hole, Wyoming, indicated that the Fed intends to maintain aggressive interest rate policies to combat inflation, further influencing Bitcoin’s price.
In the long term, market participants maintain expectations for Bitcoin’s price to rebound, particularly as more financial institutions appear to embrace the cryptocurrency.