Bitcoin, the preeminent cryptocurrency, has managed to sustain its position above the $25,000 mark, even as the financial world keenly anticipates updates on inflation and the potential approval of a spot Bitcoin ETF. Historically, the month of September has not been kind to Bitcoin, with the digital currency witnessing an average 6% drop in value from 2010 to 2022. Data from the Dow Jones stock market index further underscores this trend, highlighting consistent declines every September from 2017 to 2022.
Matteo Greco, a Research Analyst at Fineqia International, a publicly traded digital asset and fintech investment firm, provided some insights into this phenomenon. He noted that trading activity typically wanes during the third quarter, which encompasses the traditionally low-volume months of July and August. Furthermore, central banks' interest rate hikes over the past year and a half have drained liquidity from financial markets, prompting investors to adopt a more cautious stance. This has had a pronounced impact on the digital asset market, known for its volatility.
However, Bitcoin's resilience was on display earlier this week. Despite starting the week below $25,000, a three-month low, it experienced a "short squeeze" and surged close to $26,000. A short squeeze is a market phenomenon where an asset's price unexpectedly rises, catching those who bet against it off guard.
Adding to the market's apprehension is FTX's announcement of its intention to settle its debts by liquidating its assets. The now-insolvent crypto giant disclosed holdings of $3.4 billion in digital assets, which includes significant amounts of Solana, Bitcoin, and Ethereum. The company's liquidation proposal is set to be reviewed in court this week.
Yet, even as the broader crypto market seems bearish, two pivotal factors could potentially bolster Bitcoin's value: the cessation of inflation and the greenlighting of spot Bitcoin ETF applications. The global financial community is on tenterhooks for the U.S. inflation report due this Wednesday. Any further uptick in interest rates could amplify investment risks. However, as Greco points out, the market is not anticipating any imminent rate hikes, with a 93% probability of status quo at the upcoming Federal Open Market Committee (FOMC) meeting.
Greco remains sanguine about the prospects of the Federal Reserve halting rate hikes and the U.S. Securities and Exchange Commission (SEC) approving spot Bitcoin ETF applications. Such developments could usher in fresh capital and enhance market liquidity. The narrowing discounts of the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE) further suggest growing investor confidence in the eventual approval of Spot ETFs.
Another positive indicator is the long-term holder ratio of Bitcoin's supply. Greco highlighted that over 75% of Bitcoin's total supply has remained static for more than 155 days, suggesting a strong holding sentiment among investors.
As of recent data, Bitcoin traded at $25,789.74, marking a modest 0.4% gain over the past week. With a total circulating supply of 19.48 million BTC, its market capitalization hovers around $502.65 billion.
In conclusion, while the crypto market navigates a sea of uncertainties, Bitcoin's resilience and the potential positive catalysts on the horizon offer a glimmer of optimism for investors and enthusiasts alike.
