.png){kind=logo}
Crypto Price: The cryptocurrency market experienced a sharp decline today, mirroring the losses in U.S. stocks, which posted significant downturns in Tuesday's trading. Both Bitcoin (BTC) and Ethereum (ETH) fell sharply amid a broader risk-off sentiment, triggered by U.S. economic data indicating weakness and inflationary pressures. Historically, September has been a challenging month for Bitcoin prices, and this trend appears to be continuing.
This week is crucial for U.S. economic data releases, with early reports already signaling potential headwinds for both traditional and crypto markets. The Institute for Supply Management (ISM) Manufacturing PMI report for August showed a continued contraction in the manufacturing sector, with a reading of 47.2, below the expected 47.5 and slightly up from July’s 46.8. However, the details of the report suggested a stagflation-like scenario, with new orders dipping to 44.6 from July’s 47.4 and prices paid rising to 54.0 from 52.9.
These figures highlight a dual threat of slowing growth and rising inflation, complicating the Federal Reserve’s decision-making ahead of its upcoming meeting. Following the release of these soft numbers, traders increased their bets on a 50 basis point rate cut by the Federal Reserve in September, raising the odds to 39% from 30% just a day earlier, according to the CME FedWatch tool. However, the majority of traders still favor a smaller 25 basis point cut, with a probability of 61%.
The main event for U.S. macro news this week is Friday’s August employment report, which could determine the Fed's final decision on rate cuts. Economists forecast a rebound in job gains to 160,000 from July's weaker-than-expected 114,000, with the unemployment rate anticipated to dip to 4.2% from 4.3%.
The latest research from the crypto exchange Bitfinex warns that reactions to recent rate cut news could negatively impact crypto prices in September. Historically, September has been a volatile and poor-performance month for Bitcoin. Bitfinex speculates that Bitcoin (BTC) could fall as low as $40,000 over the coming weeks.
“If we were to speculate, we would caution to expect a 15-20% decline when rates are cut this month, with a bottom of $40-50,000 for BTC,” states the Bitfinex report. “This is not an arbitrary number but is based on the fact that the cycle peak in terms of percentage return reduces by around 60-70% each cycle, and the average bull market correction has reduced as well. However, this logic could be negated if macroeconomic conditions change. These are uncertain times for traders.”
With Bitcoin currently trading at $57,701, a fall to $40,000 would represent a significant decline of approximately 30% for the leading cryptocurrency. Bitfinex further notes that BTC's performance will likely be closely tied to central bank monetary policy and price action in the traditional financial markets.
“This volatility, combined with the potential for a ‘sell-the-news’ reaction after a rate cut, could present both risks and opportunities for traders. Meanwhile, Bitcoin’s increasing correlation with traditional risk assets like the S&P 500 suggests its price movements will remain closely tied to global macroeconomic conditions,” the Bitfinex report concluded.
As of today, most major cryptocurrencies are in the red, reflecting the overall negative sentiment in the financial markets.
Bitcoin (BTC): Currently trading at $56,568.53, down 4.33% in the last 24 hours and 5.09% over the past week.
Ethereum (ETH): Trading at $2,367.73, down 5.86% in the last 24 hours and 4.48% over the past week.
Polkadot (DOT): Priced at $4.04, down 4.76% in the last 24 hours and 7.26% over the past week.
Solana (SOL): Trading at $127.19, down 5.83% in the last 24 hours and 14.07% over the past week.
Ripple (XRP): Currently at $0.55, down 2.56% in the last 24 hours and 3.13% over the past week.
Shiba Inu (SHIB): Priced at $0.00001304, down 4.54% in the last 24 hours and 5.71% over the past week.
While the broader market experienced a decline, a few cryptocurrencies managed to post gains:
Sui (SUI): Up 2.31%, currently trading at $0.8028.
Bitcoin SV (BSV): Gained 2.08%, now at $44.72.
Monero (XMR): Up 1.79%, trading at $174.72.
Tether Gold (XAUt): Marginally up by 0.02%, priced at $2,496.99.
These gainers highlight that while the overall market sentiment is bearish, there are still pockets of strength, possibly driven by specific news or developments within those projects.
On the flip side, several cryptocurrencies experienced substantial losses:
DOGS (DOGS): Down 11.10%, currently trading at $0.001001.
Bittensor (TAO): Declined by 9.61%, now priced at $252.91.
Akash Network (AKT): Down 9.51%, trading at $2.22.
Notcoin (NOT): Decreased by 9.38%, now at $0.007644.
Brett (Based) (BRETT): Dropped by 9.35%, priced at $0.06835.
Cosmos (ATOM): Fell 9.20%, currently at $4.05.
Fantom (FTM): Down 9.01%, now at $0.3864.
Injective (INJ): Decreased by 8.86%, priced at $15.59.
Lido DAO (LDO): Dropped 8.62%, trading at $0.9675.
Toncoin (TON): Down 8.48%, currently at $4.81.
Analyzing the Market Sentiment: What’s Next for Crypto Prices?
The current downturn in crypto prices is heavily influenced by macroeconomic factors, particularly in the United States. The sharp decline in Bitcoin and Ethereum prices, coupled with the overall bearish sentiment, reflects traders' concerns about the broader economic environment, including the possibility of further rate cuts by the Federal Reserve.
September has historically been a volatile and challenging month for Bitcoin and other cryptocurrencies. Market participants often refer to this phenomenon as the "September Slump," a period marked by price declines and increased volatility. Several factors contribute to this trend, including seasonal changes in trading behavior, shifts in risk appetite, and macroeconomic uncertainties.
Given the current economic data, including weaker manufacturing numbers and signs of rising inflation, it is likely that September could continue to be a difficult month for the crypto market. The upcoming employment report on Friday will be a critical data point that could determine the Federal Reserve's next move and, by extension, the direction of crypto prices.
According to Bitfinex’s research, Bitcoin could fall as low as $40,000 in the coming weeks, representing a potential 30% decline from its current price. This scenario is based on historical trends and the assumption that a rate cut will lead to a "sell-the-news" reaction in the market.
However, there are alternative scenarios. If the employment report shows stronger-than-expected job gains and the Federal Reserve opts for a more modest rate cut of 25 basis points, this could restore some confidence in the market and potentially lead to a stabilization or even a rebound in crypto prices. Conversely, a worse-than-expected employment report could increase the likelihood of a more aggressive rate cut, further exacerbating market volatility.
While the current market environment presents risks, it also offers opportunities for savvy traders and investors. Here are some strategies that could be considered:
Short Selling: Given the bearish sentiment, traders may consider short-selling Bitcoin or other major cryptocurrencies to capitalize on potential price declines.
Diversification: Investors could explore diversifying into assets that have shown relative strength, such as Sui (SUI) and Bitcoin SV (BSV), which posted gains despite the broader market downturn.
Stablecoin Yield Farming: For those looking to avoid direct exposure to volatile assets, stablecoin yield farming could be an attractive option. Stablecoins like USDT or USDC offer relatively stable value and can be used in DeFi platforms to earn interest.
Accumulating at Lower Levels: Long-term investors may see the potential price drops as an opportunity to accumulate Bitcoin and Ethereum at lower levels, with the expectation that prices will recover over time.
The current crypto market landscape is characterized by uncertainty, driven largely by macroeconomic factors and the anticipation of the Federal Reserve's next moves. With Bitcoin and Ethereum prices already experiencing sharp declines, and the potential for further downside in September, traders and investors need to be prepared for continued volatility.
While the immediate outlook may appear bearish, it is essential to remember that the cryptocurrency market is known for its rapid and unpredictable changes. Historical trends suggest that September could be a challenging month, but opportunities remain for those willing to adapt their strategies and take advantage of market movements.
As always, keeping a close eye on key economic data releases, such as Friday's employment report, will be crucial in assessing the market’s direction. Whether the crypto market rebounds or continues to decline, staying informed and ready to adjust strategies will be the key to navigating these uncertain times.
