Bitcoin's recent rally has lost significant momentum as the cryptocurrency dropped below the $57,000 mark on Thursday, reversing the modest gains seen earlier in the week. The decline comes as investors remain jittery about the strength of the U.S. economy, prompting a broader sell-off in risk assets. Bitcoin fell over 2%, trading at around $56,700, marking a continuation of the "sell-on-rise" pattern that has characterized its recent market behavior.
This downward trend follows Bitcoin's peak above $65,000 in late August, with the cryptocurrency struggling to maintain its footing amid growing concerns about a potential U.S. recession. The persistent selling pressure is also reflected in the broader cryptocurrency market, with major digital assets like Ethereum and XRP also experiencing declines, according to CoinDesk data. The CoinDesk 20 Index, which tracks the broader crypto market, showed only a slight 0.9% gain, indicating a general market hesitation.
Analysts attribute this cautious market sentiment to increasing signs of economic weakness in the U.S. Valentin Fournier, an analyst at digital assets advisory firm BRN, noted that recent economic reports have amplified recession fears. "The ISM manufacturing index has fallen 0.5% below expectations, and job openings are at 7.7 million compared to the anticipated 8.1 million," Fournier explained. He added that the current economic uncertainties suggest a prudent approach, advising investors to reduce their exposure to Bitcoin until a clearer entry point emerges.
The U.S. Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) on Wednesday, which revealed that the number of job openings in July was lower than expected, further fueling concerns about a slowing economy. The Federal Reserve's Beige Book, which summarizes economic conditions, also painted a gloomy picture, describing a "slowing, slackening labor market." This has led to increased speculation about potential interest rate cuts, although the weak data has yet to provide a solid floor for Bitcoin's price.
Alex Kuptsikevich, a senior market analyst at FxPro, highlighted that Bitcoin's inability to capitalize on the recent weakness in the U.S. dollar could be a warning sign for traditional risk assets. "The weakness in cryptocurrencies might be a manifestation of a very limited risk appetite, and the rest of the markets may soon follow the lead of cryptocurrencies," Kuptsikevich said. He also pointed out that Bitcoin has been down for nine of the last eleven trading days, with its attempts to consolidate above the 200-day moving average triggering intensified sell-offs.
Adding to the market's anxiety, Goldman Sachs has issued a significant warning about a potential stock market crash, linked to this week's closely-watched jobs numbers. Scott Rubner, Managing Director for Global Markets at Goldman Sachs, cautioned that "a market correction may start to get traction if payrolls are weak on Friday." The upcoming payroll report is expected to play a crucial role in the Federal Reserve's September interest rate decision, with any signs of weakness potentially accelerating a market downturn.
Bitcoin's struggles have also led to a notable shift in sentiment among prominent figures in the crypto space. Arthur Hayes, co-founder of BitMex and a well-known Bitcoin trader, has reversed his short-term price prediction for the cryptocurrency. Hayes had initially forecasted a new Bitcoin bull run to begin in September, driven by anticipated liquidity injections from the Federal Reserve, U.S. Treasury, and China. However, in a recent blog post, Hayes acknowledged that he had changed his mind, now expecting Bitcoin to either stagnate or gradually decline towards $50,000.
This revised outlook aligns with a bearish warning from analysts at Bitfinex, who predict that Bitcoin's price could drop as low as $40,000 in the short term. As market participants await the Federal Reserve's next move, the cryptocurrency market remains on edge, with Bitcoin's future trajectory increasingly uncertain amid ongoing economic and geopolitical challenges.
