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(Kitco News) – Cryptocurrency prices continued to slide lower on Friday as the realization that there is unlikely to be any movement on the spot Bitcoin (BTC) exchange-traded fund (EFT) front until at least October. The delay has led many to exit the market amid increasing weakness.
Stocks were mixed after August payroll data showed an unexpected jump in U.S. unemployment, with the economy adding 187,000 jobs, compared to 170,000 expected, while the unemployment rate rose 3.8% versus the 3.5% expected. Analysts suggested these figures are likely to add to the uncertainty around the Federal Reserve’s future path of interest rates.
At the market close, the S&P and Dow finished in the green, up 0.18% and 0.33%, respectively, while the Nasdaq finished flat.
Data provided by TradingView shows that Bitcoin bears managed to overwhelm bull support at $26,000 near midday, pounding the top crypto to a daily low of $25,315 in the afternoon and looking to push it even lower as the weekend approaches.
BTC/USD Chart by TradingView
“September Bitcoin futures prices [were] near steady in early U.S. trading Friday, after posting sharp losses Thursday,” according to Kitco senior technical analyst Jim Wyckoff.
Bitcoin futures 1-day chart. Source: Kitco
“Bears have gained momentum and strength late this week,” Wyckoff said. “A price downtrend line is in place on the daily chart. The bears still have the overall near-term technical advantage and would gain more power by pushing prices to new for-the-move lows and producing a bearish downside ‘breakout’ from the recent trading range.”
A shortage of liquidity hampers the market
As for the source behind the continued weakness, David Lifchitz, managing partner and chief investment officer at ExoAlpha, told Kitco Crypto that the main issue the market is facing is a shortage of liquidity.
Lifchitz said that much of the liquidity seen in 2021 and 2022 was “brought by large institutions diving into cryptos, but these large investors turned cold feet as the 2022 bear market unraveled and FTX was the last nail in their crypto coffin. They haven’t come back yet, hence the lack of liquidity in the market.”
“Institutional investors were interested in cryptos because of their potential for generating a double-digit return in a couple of weeks, which was not possible with traditional assets without a significant amount of leverage and as much risk,” he said. “Some of them took a hit in 2022, but that was part of the game. What drove them out was the failure of FTX, which highlighted the operational weakness of the asset class trading infrastructure.”
He said that while they accepted the risks involved with trading, such as taking a trading loss, the infrastructure risk added too much uncertainty.
“Then, on top of that, the regulators stepped in, creating even more confusion in the space, while the typical double-digit returns were no more,” he said. “So why would they remain in the minefield without reward?”
Lifchitz suggested that things won’t improve for the crypto market until liquidity comes back, and that won’t happen until institutional investors return. “For that, they need to see a more robust infrastructure, more clarity on the regulatory front, and the potential again for double-digit returns in a short period of time,” he said.
“Many think that the approval of a spot Bitcoin ETF would ignite investors’ animal spirit, but that would just bring an easier way for investors to access Bitcoin instead of a still cumbersome process,” he said. “It may generate some interest in the short term, but if institutional investors don’t embrace the asset class again, the Bitcoin-ETF-induced effect may not last long.”
“Now that August 2023 comes to an end, we’ll see how September will shape as the month of September has historically been a weak month for risk assets (cryptos & stocks),” he said, noting that prices ended August struggling to hold onto support.
Lifchitz’s September concerns were echoed by MN Trading founder Michaël van de Poppe, who said, “September is quite often a terrible month for the markets. It’s the worst month in history for Bitcoin and in the previous years, we’ve also been seeing [a] tremendous amount of blood flooding in.”
Poppe noted that the last time Bitcoin saw a green September was in 2016. Since then, the top crypto has lost between five and eight percent during the month. “That would automatically mean we’ll be seeing Bitcoin drop to $23-24K (beneath the 200-Week EMA),” he said.
Looking at it from a positive perspective, Poppe noted that after seeing gains in September 2015, Bitcoin had a “massive” Q4.
“This seems very likely to repeat itself, given the fact that we’re approaching a big year in 2024,” he said. “The price for Bitcoin around $24,700-25,200 is an important one to eye for potential entry zones as then we’ve got a sweep of the lows being done.”
BTC/USD 1-week chart. Source: Twitter
“If support there is lost, then a deeper pullback to “$23-23.5K or even $20K” is possible, Poppe said. “As we’re approaching a significant year of 2024, it might be your final dip to buy.”
Altcoins slide lower
Roughly a dozen tokens in the top 200 managed to post positive gains on Friday, while the rest finished the week in the red.
Daily cryptocurrency market performance. Source: Coin360
CyberConnect (CYBER) led the gainers with an increase of 54.55%, followed by a 13.24% gain for Toncoin (TON) and a 7.7% increase for API3 (API3). UniBot (UNIBOT) was the biggest loser, falling 14.4%, while yesterday’s biggest gainer, JOE (JOE), declined by 10.4%.
The overall cryptocurrency market cap now stands at $1.03 trillion, and Bitcoin’s dominance rate is 48.3%.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
