The momentum behind Bitcoin and other cryptocurrencies seems to be losing steam as they experience a slight dip in value following a recent court ruling in favor of the crypto industry. Traders are now turning their attention to the release of inflation data on Thursday, as August historically marks Bitcoin’s worst performing month.
Over the past 24 hours, the price of Bitcoin has dropped by less than 1% to reach $27,200. This decline comes after the digital asset briefly surged above $28,000 earlier this week. The rally was sparked by a significant court ruling against the Securities and Exchange Commission, which is likely to pave the way for a spot Bitcoin exchange-traded fund.
Commenting on the current situation, analyst Alex Kuptsikevich from broker FxPro noted, “The crypto market is cooling down after a surge in buying. Bitcoin experienced a brief dip to $27,000 on Wednesday, erasing about half of its initial jump from $26,000 to $28,000. It is now trading below both its 200-day and 200-week averages, despite the increased risk appetite in traditional markets.”
In recent days, Bitcoin has lagged behind traditional indices such as the Dow Jones Industrial Average and the S&P 500. This trend has contributed to one of the quietest periods in crypto price movements. However, traders are hopeful that this lull will come to an end with the release of personal consumption-expenditures (PCE) data on Thursday. This data serves as the Federal Reserve’s preferred measure of inflation.
Antoni Trenchev, co-founder and managing partner at crypto lender Nexo, emphasized the importance of this upcoming event, stating, “After the initial excitement following the Grayscale legal victory on Tuesday, Bitcoin investors are now focusing on examining concrete economic data in the form of the Fed’s preferred inflation gauge.”
As the crypto market awaits this vital catalyst, it remains to be seen whether Bitcoin and its counterparts will overcome their recent slump or continue to face downward pressure as August progresses.
Economic Data and the Outlook for Risk-Sensitive Assets
Amid shifting expectations regarding interest rates, economic data continues to play a crucial role for risk-sensitive assets. Since March 2022, the Federal Reserve has raised interest rates to their highest level in a generation, impacting both Bitcoin and stocks as a measure to control inflation. However, signs of slowing inflation and a weakening economy could prompt the Fed to reconsider its stance, potentially leading to a pause in rate actions or even a reduction in borrowing costs. As a result, investors eagerly await the release of the Thursday PCE data and the August jobs report on Friday.
The Potential Impact on Bitcoin
If the PCE data reveals a cooling trend and the employment report indicates a slowdown in job growth, it could ignite renewed activity in Bitcoin, pushing it towards the late $20,000 range after fading following Tuesday’s rally. This could potentially be one of the last opportunities for digital assets to experience a significant upward surge before September begins, historically known as one of the most challenging months for Bitcoin performance.
September: A Historically Tough Month for Bitcoin
Drawing from historical patterns, September has rarely been a favorable month for Bitcoin, with only two monthly gains observed over the past decade, the most recent of which occurred in 2016. This highlights the importance of monitoring market dynamics closely as September approaches.
Other Cryptocurrencies in Focus
Moving beyond Bitcoin, Ether – the second-largest cryptocurrency – experienced a marginal decline of less than 1%, resting at $1,700. Meanwhile, smaller tokens or altcoins displayed mixed movements, with Cardano slipping less than 1% and Polygon showing a modest increase of less than 1%. Dogecoin witnessed a 2% rise, while Shiba Inu recorded a 1% decline.
In conclusion, economic data plays a vital role in shaping the outlook for risk-sensitive assets amidst changing expectations around interest rates. As investors await key reports, such as the PCE data and the August jobs report, the fate of Bitcoin and other cryptocurrencies hangs in the balance. September looms as a potentially challenging month, as historical trends have shown limited gains during this period.