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Last week, we mentioned that Nvidia’s financial results were highly anticipated, as they now have a significant impact on the direction of the markets and the interest in risk assets versus more fundamental values. Despite excellent results, the stock has been sharply declining since then. Nvidia notably fell by 9.5% on Tuesday, wiping nearly $300 billion off the chipmaker’s market capitalization and dragging other semiconductor stocks down with it. Such a decline signals a current shift away from risk assets, including Bitcoin.
Yesterday was tough for the cryptocurrency market, with a significant drop in Bitcoin below $57,000 and Ether hitting its lowest level in seven months. This decline occurred while U.S. stock markets also suffered heavy losses, with the Nasdaq down 3.3% and the S&P 500 down 2.1%. This bearish trend in cryptocurrencies, already well established in recent weeks, was exacerbated by disappointing U.S. economic data for August, showing weakened manufacturing activity and increased inflationary pressure.
With these weak economic indicators, markets are now betting on an increased probability of 39% for a 50 basis point rate cut by the Federal Reserve in September, up from 30% the day before. However, a 25 basis point cut remains the most likely scenario at 61%. The outlook for Bitcoin remains uncertain, especially in September, a historically unfavorable month for the cryptocurrency, according to Alex Thorn of Galaxy Research. However, optimism could return in the fall, particularly in October, which has often been a favorable month for cryptocurrencies. It also goes without saying that a higher-than-expected rate cut could boost crypto assets this month. A 25 basis point cut could signal the start of a typical easing cycle, while a more aggressive 50 basis point cut could cause an immediate spike in Bitcoin’s price, followed by a correction as economic concerns intensify. Recession indicators, such as the inverted U.S. Treasury yield curve, suggest a 50% chance of a recession in the next 12 months, which could weigh on risk assets. If these pessimistic scenarios materialize, there could be a great buying opportunity, as Bitcoin has historically seen strong gains in the year following its halvings.
BlackRock’s Bitcoin ETF, the iShares Bitcoin Trust (IBIT), recorded net outflows of over $13 million last Thursday, marking its first loss since May. This move comes amid widespread net outflows among U.S. spot Bitcoin ETFs, with withdrawals totaling around $71,800 on that day. Grayscale, Fidelity, and Bitwise also recorded losses of $22.7 million, $31.1 million, and $8.1 million, respectively. Despite this worrying trend for some Bitcoin investors, Glassnode analyst Brett Singer believes there is no cause for alarm at this time, noting that overall Bitcoin ETF growth has remained steady and the amounts withdrawn are relatively negligible. Bitcoin has lost about 11% of its value over the past month and remains down nearly 20% from its all-time high of $73,737 reached in March.
Bitcoin’s price may be down, but its hash rate has reached an all-time high, indicating that the cryptocurrency’s decentralized network is stronger than ever. Today, Bitcoin’s hash rate hit 742 exahashes per second (EH/s), a record high, marking a 70% increase from last year. A high hash rate means more computing power is being used to secure the network, making it more difficult for malicious actors to control more than 50% of the network. This also reflects increased mining activity on the network, with miners expanding their operations and using more machines and electricity to process transactions and create new bitcoins. Although Bitcoin’s price is currently unstable, long-term investors can be reassured by the increased robustness of the network, which continues to fulfill its mission of being a secure, permissionless digital currency system.
The total market capitalization of stablecoins, excluding algorithmic stablecoins, has reached a new all-time high of over $168.1 billion, according to DefiLlama data. This 0.8% increase over the past seven days surpasses the previous peak in March 2022, which was around $167 billion. Crypto analyst Rachael Lucas explains that this growth could indicate an influx of institutional capital into cryptocurrencies, seeking to take advantage of the stability of stablecoins during uncertain market conditions. Moreover, stablecoins like USDT, which now represents about 70% of the total market capitalization, are increasingly being used as a bridge between traditional finance and the crypto sector. USDT has seen its capitalization increase by 28% this year, reaching $117.84 billion, while Circle’s USDC has also grown, from $23.8 billion to $34.4 billion in 2024.
Bitcoin reserves on exchange platforms have reached a historic low, with only 2.39 million BTC, a 25% decrease from their peak in 2020, where they were close to 3.2 million BTC, according to Coinglass data. A CryptoQuant analyst associates this decrease with the growing adoption of self-custody strategies by investors. This decline in BTC reserves on exchanges could indicate reduced selling pressure, which could favor a long-term bull market if demand continues to increase.
El Salvador’s President Nayib Bukele has acknowledged that Bitcoin adoption in his country has not reached the expected levels. In an interview with TIME, Bukele admitted that fewer Salvadorans than expected are using the cryptocurrency, despite its status as legal tender since 2021 alongside the US dollar. Although Bukele hoped for wider adoption, he emphasizes that Bitcoin use remains voluntary and that no one is forced to adopt it. Despite criticism from the IMF and some American politicians, Bukele has continued to strongly support Bitcoin, even purchasing the cryptocurrency for the state’s reserves. El Salvador currently holds about 5,858 BTC, worth $348 million. Bukele believes Bitcoin offers Salvadorans the opportunity to save in an asset perceived as a store of value, although he acknowledges that the experiment could still improve. He remains optimistic, stating that the Bitcoin experiment has had no negative consequences and that the country remains free in its approach to cryptocurrency.
Do you think prediction markets are more reliable than polls? U.S. Vice President Kamala Harris’s odds of winning the upcoming presidential election have fallen to 47% on the decentralized prediction platform Polymarket, down from a 50% tie the previous week. Meanwhile, Donald Trump’s odds remain around 50%, surpassing Harris’s after a tie recorded on August 26. The U.S. election result prediction market remains the largest on Polymarket, with a betting volume reaching about $777 million.
On a related note, former President Donald Trump announced on the X platform that he would unveil a plan on Thursday to make the United States the “world capital of cryptocurrencies.” In his message, he also mentioned World Liberty Financial, a decentralized finance (DeFi) project promoted by his sons, Donald Trump Jr. and Eric Trump. This announcement appears to be part of a strategy to attract voters interested in cryptocurrencies. Trump has intensified his interest in the crypto sector since his speech at the Bitcoin 2024 conference in July, where he promised to fire Gary Gensler, the SEC chairman, and create a “strategic bitcoin reserve” if elected in November. Details on Trump’s role in World Liberty Financial and the services the company will offer remain unclear.
Crypto analysts anticipate three major events in the coming weeks that could influence Bitcoin’s price, currently in a downtrend between $74,000 and $52,000 for seven months. Bitcoin’s future will depend on how the market reacts to political and regulatory changes in the United States during the election season, as well as upcoming macroeconomic data. The anticipated interest rate cut by the Federal Reserve could be beneficial for risk assets like Bitcoin, but the extent of this cut remains uncertain and will influence the market.
According to analysts, Bitcoin’s price could experience volatility in September, a historically unfavorable month for this cryptocurrency. A sustained break above the $65,000 level could trigger a bullish trend, but resistance between $70,000 and $74,000 will need to be overcome to confirm this reversal. Investors should therefore prepare for volatile market movements while monitoring key economic indicators, such as U.S. employment data, which could influence the Fed’s decisions on interest rates.
According to an analysis by CryptoQuant, new Bitcoin investors who bought during the March highs face unstable market conditions reminiscent of 2019. Many of these investors, who acquired their BTC when the price reached its all-time high of $73,800 in March, are either holding their positions or selling at a loss after six months of price stagnation. An increase in unspent transaction outputs (UTXOs) aged less than six months indicates that some of these investors have exited the market due to losses, while others continue to hold their assets for the long term.
The analysis highlights that the influx of new investors is crucial for long-term price increases. However, in the current context, short-term investors are posting unrealized losses, making it difficult for Bitcoin to see a significant rise in the short term. The market has remained in a stable price range for more than six months, with no clear trigger for a new bullish momentum, reminiscent of market conditions in 2019. However, let’s not forget the significant surge that followed for patient investors!
The presented information is as of September 4th, 2024, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
