Bitcoin's next big move depends on changes in market sentiment. Will Bitcoin's See-saw Year Lead to a Comeback or a Crash?
This has been a see-saw year for Bitcoin. Every time the price flirts with breaking old highs, it turns upside down.
But is a rebound finally on the cards?
According to GSR analysts, Bitcoin's unpredictable price swings are “driven more by sentiment and less by fundamentals”.
Market watchers are now looking at four key factors influencing the price of Bitcoin.
US elections
Bitcoin's next big move depends on the US presidential election.
While former President Donald Trump, considered pro-crypto, fired Securities and Exchange Commission Chair Gary Gensler and made plans to establish a bitcoin reserve, Vice President Kamala Harris has been very vague on her stance.
Concerns are also growing that the results of the November elections may be contested.
said Adam Guren, chief investment officer at Hunting Hill News A contested election “could push us into a bit of a recession, or at least a slowdown.”
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“In that version, you'll have more rate cuts,” Guran added, “which would drive up the price of bitcoin, along with other risk-on assets.”
As Election Day nears, poll results and campaign promises are expected to weigh on sentiment, especially for assets like Bitcoin.
Monetary policy
Easing monetary policies by central banks could act as a tailwind for bitcoin, but more aggressive tightening could be a drag on the market.
Historically, increased global liquidity boosts risk assets like Bitcoin. GSR analysts say to watch the US Federal Reserve and the Bank of Japan.
The Fed is expected to cut rates again in November, which coupled with solid economic data could boost bitcoin's price.
Don't expect the Fed to make an aggressive tax cut in September – CME Group's FedWatch tool puts the odds of a 0.25% rate cut at just over 80%.
Japan has begun to shift away from its long-term negative interest rates, with the BoJ hinting at gradual rate hikes to stabilize the yen.
If Japan continues down this path, it could trigger wide swings in crypto prices.
The US economy
The US economy remains a major factor in bitcoin's near-term outlook, with mixed signals keeping investors on edge.
While recent data shows signs of stability, such as steady job growth and positive commentary from the Fed, there are also worrisome indicators, such as the recent drop in consumer confidence.
GSR analysts say that while “bears are looking at incoming data,” the US is headed for a soft landing, which they see as a positive catalyst for crypto.
On the other hand, signs of recession fears could send Bitcoin lower as investors turn to safer assets.
Selling the Silk Road
Another factor affecting Bitcoin is the US government's potential sale of nearly 69,000 bitcoins — worth about $4.2 billion — seized from the Silk Road marketplace.
The Supreme Court's recent decision to deny hearing the appeal paves the way for error. GSR's Brian Rudick cautions investors not to ignore the potential impact.
“This could cause a nice downward draft in the markets,” Ruddick said News.
The government's sale of such a large amount earlier this year in Mt. Gox distributions mirrored the market turmoil, which saw Bitcoin collapse by nearly 20%.
If a sale takes place, it may lead to increased volatility depending on the method and timing of the liquidation.
Crypto market movers
Bitcoin is also trading at $61,050 on the day. Ethereum rose 0.6% to $2,411.
What are we studying?
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Kyle Baird News' Weekend editor. Got a tip? Email at [email protected].
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