The bullish momentum that propelled Bitcoin’s 56.4% year-to-date gain has all but evaporated, with prices closing August down 13%. Bitcoin’s price appeared to have gained some bullish momentum following Grayscale’s court victory against the U.S. Securities and Exchange Commission (SEC), but those gains have since evaporated.

Bitcoin’s contraction

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$25,832 USD

Some analysts have compared the current BTC market to prices prior to the 2015-2017 bull cycle.

BTC/USD 1-day price. Source: TradingView
Let’s take a closer look at the factors that affect the price of Bitcoin today.

Related: ‘Elegant and Backward’: Jameson Lopp’s First Bitcoin Impressions

Bitcoin Investor Sentiment Stalls
In early 2023, short traders continue to dominate the liquidation of the futures market. On Aug. 17, more than $213.5 million in long positions were liquidated, catching bulls off guard. This is the largest single-day liquidation of Bitcoin longs since the Terra Luna crash in May 2022.

Long liquidations continued in August, with $41.7 million liquidated in the 24 hours following September 1.

Bitcoin futures clearing. Source: CoinGlass
When Bitcoin longs are liquidated without volume buying pressure, Bitcoin price is negatively affected. Bitcoin trading volumes also hit their lowest levels since early 2021, with BTC Ordinals down over 98%.

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Related: How to Protect Your Crypto in a Volatile Market: Engagement from Bitcoin OGs and Experts

The lack of sustained trading volume has caused the key investor sentiment gauge, the Fear and Greed Index, to fall in a downtrend over the past 30 days, shifting from neutral to fearful sentiment.

Fear and Greed Index. Source: Alternative
The short-term uncertainty in the cryptocurrency market does not appear to have changed the long-term outlook for institutional investors. Despite the unfavorable regulatory environment in the United States, large institutions are still promoting the development of bitcoin financial instruments, which may spark a bull market. Grayscale directly urges the SEC to approve all Bitcoin ETFs.

Bitwise Officially Withdraws Bitcoin and Ether Despite Urgency From Major Financial Firms

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ETF application. The SEC appears poised to continue delaying its decision to approve a Bitcoin ETF, including BlackRock’s application, until 2024, which could negatively impact investor sentiment and price action across the crypto market.

Bitcoin options market continues to soar
Bitcoin’s market structure has been recovering since early 2023, but its recent price action has turned the market structure bearish. Despite the surge in Bitcoin open interest, the lack of consolidation above $27,000 has seen some analysts see BTC price heading towards $23,000.

The bullish moment will be completely erased if the dip touches the key $24,750 level.

Related: ‘100% Bulls Hit’ Bitcoin Metric Predicts BTC Price Floor at $23,000

While some investors have speculated that BlackRock may be weighing down the price of bitcoin before the eventual launch of the ETF, the claim appears to be a conspiracy, as a plunge in the price of bitcoin would result in more losses for BlackRock.

Despite the current depressed Bitcoin price, Pantera Capital believes that BTC could reach $148,000 by July 2025.

Will short-term macroeconomic pain lead to long-term gains for cryptocurrencies?
Bitcoin prices continue to be directly affected by macroeconomic events, and further regulatory actions and interest rate hikes may also continue to have some impact on Bitcoin prices. Bitcoin prices have continued to fall despite China’s ruling on Sept. 1 that the virtual asset is legal property.

Federal Reserve Chairman Jerome Powell also delivered a speech in Jackson Hole, Wyoming on Aug. 25, saying that the Fed will continue to pursue aggressive interest rate policy as long as it keeps inflation in check.

In the long run, market participants still expect Bitcoin’s price to recover, especially as more and more financial institutions appear to be embracing Bitcoin.

Source: CoinTelegraph