Fri, 09/27/2024 - 08:00
Bitcoin and the wider crypto market are known for their volatility, but the past few weeks have been unpredictable, even by their loose standards. After steadily gaining almost 350% between January 2023 and June 2024, a major correction ensued this summer, as BTC fell from its new ATH of over $73,000 to a hair below $54,000 at the beginning of this month. Following this significant drawdown of around 27%, Bitcoin has recovered well in September to regain a full half of its losses and now sits at $63,443 (26/09/2023). As we move into a more dovish central bank policy climate, many traders and investors will be wondering if this rally can be sustained and if the key local resistance of $65,000 will be broken.
Indeed, there remain plenty of positive factors for digital assets, but much uncertainty, too. From concerns about the result of the upcoming US presidential election to worries of a wider recession, there's a good dose of fear to rival the greed. But as bulls and bears prepare to go horn to claw in Q4 2024, who is likely to come out on top and what will be the main drivers to watch?
Sending positive vibes
It's reasonable to suggest that this recent correction was nothing but a small bump in the road for Bitcoin amid a largely favourable environment for risk assets. The US Federal Reserve just announced a full 50 bps rate cut, and it would seem they're not done yet. Meanwhile, the spot Bitcoin ETFs approved in early 2024 continue to add more and more funds to their balance sheets regardless of the market situation. In fact, it is expected that they may soon overtake the fabled Satoshi Nakamoto in terms of most BTC held, having already attained 83% of his 1.1 million total.
The buying habits of big funds, which tend towards purchasing large volumes during periods of correction, have doubtlessly helped Bitcoin to rebound quickly from its recent drawdown and will continue to reinforce BTC's local supports for the foreseeable future. The buzz surrounding last week's approval of BlackRock's spot ETF options listing on the Nasdaq will also certainly help to buoy Bitcoin and may even provide the boost it needs to get back above the $65,000 mark.
Looking to the longer term, one huge development for BTC was the leak of SEC documents revealing that BNY Mellon is to be granted an exemption from SAB 121, a regulation that required banks to hold cash equal to the amount of any crypto assets they were holding. If we see a domino effect similar to that seen when spot ETFs were approved, this will be huge for Bitcoin's full-scale adoption by the traditional finance industry – something that will bring large amounts of liquidity and new capital inflows while also reducing volatility.
Don't let your guard down
While the evidence is strong for a bright future in the crypto market, there are several near-term risks that all investors and traders should prepare for. Perhaps the most publicised in recent weeks is, of course, the upcoming US presidential election. Many in the cryptosphere would appear to fear the uncertainty that a Kamala Harris White House might bring. Unlike Trump, her position remains ambiguous, and the Democrats' tendency towards more stringent digital currency regulation has some traders spooked.
Another huge question mark for BTC right now is the potential expiry on 27 September of $8.1 billion in Bitcoin options. The possible impact of this on the wider market is obvious, but it will all depend on the prevailing sentiment among market participants. The outcome will ultimately be determined by the balance between calls and puts will, with higher call options indicating more bullish sentiment and higher puts showing more bearish expectations.
A key Bitcoin indicator – the fear and greed index – stands at 59, which means that sentiment is in the bulls' favour for now. There has also been high Open Interest this week, which typically spells more volatility. At the same time, a surge in BTC exchange reserves reveals that traders are moving coins to exchange addresses, which might indicate that they are preparing for a sell-off if the market turns. While relatively short-term in nature, these are still valid concerns for both active traders and HODLers in the coming weeks.
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