The bullish momentum that propelled Bitcoin (BTC) up 57.8% year-to-date has all but evaporated this week as the price of the cryptocurrency fell 9.1% over the past seven days. Bitcoin price continues to trade below the 20-week exponential moving average of $27,750, a key level to regain bullish momentum.
The contraction in Bitcoin’s price has led some analysts to compare the current Bitcoin market to conditions leading up to the 2015-2017 bull cycle.
Let’s take a closer look at the factors that affect the price of Bitcoin today.
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Bitcoin Investor Sentiment Stalls
In early 2023, short traders continue to dominate the liquidation of the futures market. On August 17, more than $213.5 million in long positions were liquidated, catching bulls off guard. This is the largest single-day liquidation of Bitcoin longs since the Terra Luna crash in May 2022.
When Bitcoin longs are liquidated without volume buying pressure, Bitcoin price is negatively affected. Bitcoin trading volumes are also at their lowest level since early 2021, with BTC Ordinals trading volume down by more than 98%.
The lack of consistent trading volume has caused the Fear and Greed Index, a key investor sentiment indicator, to enter a downtrend from neutral sentiment to fear sentiment over the past 30 days.
The short-term uncertainty in the cryptocurrency market does not appear to have changed the long-term outlook for institutional investors. Despite the harsh regulatory environment in the United States, large institutions are still promoting the development of bitcoin financial instruments, which may spark a bull market. Grayscale directly urges the SEC to approve all Bitcoin ETFs.
Despite the urgency of major financial firms, the SEC appears poised to continue delaying the decision to approve a Bitcoin ETF until 2024, which could negatively impact investor sentiment and price action across the crypto market.
Bitcoin options continue to proliferate
Bitcoin’s market structure has been recovering since early 2023, but its recent price action has turned the market structure bearish. Despite a surge in Bitcoin open interest, there is a lack of consolidation above $30,000.
The surge in open interest has led some analysts to believe that a sharp correction to $29,000 is possible.
related: Bitcoin ‘overconfidence is rife’, but bulls must reclaim $27,800 — trader
While some investors have speculated that BlackRock may be weighing down the price of Bitcoin before eventually launching an ETF, this narrative appears to be a conspiracy as they stand to lose more from the collapse in BTC prices.
Despite the current depressed price of Bitcoin, Pantera Capital believes that BTC could reach $148,000 by July 2025.
Will short-term macroeconomic pain lead to long-term gains for cryptocurrencies?
Bitcoin prices continue to be directly affected by macroeconomic events, and further regulatory actions and interest rate hikes may also continue to have some impact on Bitcoin prices. According to Cointelegraph research, this resulted in a 10.26% drop in cryptocurrency VC inflows.
Federal Reserve Chairman Jerome Powell will speak at Jackson Hole on Aug. 25, which may shed some light on whether the central bank will continue its aggressive interest rate policy.
BDE Ventures CEO Brian D. Evans digs into how macro events are impacting the current Bitcoin price action,
“Growth has remained relatively steady, even with signs of weakness. Inflation has fallen markedly. Central banks are clearly willing and ready to provide a lot of liquidity to prop up crumbling banking systems and stimulate faltering economies. I suspect, then, that we’re going to have a A prolonged period of sideways volatility. When the market eventually rises further, the perpetual bears will be on the sidelines again.”
In the long run, market participants still expect Bitcoin’s price to recover, especially as more and more financial institutions appear to be embracing Bitcoin.
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