Bitcoin recently tested a one-month low as traders in various asset classes around the world have shown increasing aversion to risky assets due to mounting concerns about the economic outlook. Bitcoin, the dominant digital currency, was down more than 4 percent on Wednesday before gaining some ground and crossing $56,635 at 12:45 p.m. Singapore time. As with Bitcoin, other major altcoins such as Ether also experienced a decline during this period.
Market anxiety is traced to weak economic signals especially from both the USA and China thus making it the worst period for stocks since the August 5 stock meltdown. This has also been reflected in the crypto market and presently traders await any signal from the upcoming US jobs report due tomorrow to check the possibility of a more severe deceleration of the economy.
Technological advancement has made it easy to place bets on the future value of Bitcoin and there has been observed an increased demand for options that could hedge against future losses, especially after the US payroll report and the November presidential election. Arbelos Markets Director of Trading Sean McNulty also pointed out that there is increased interest in downside protection particularly on options with the $55K and below with interest coming in after the latest payroll data. An equally important role was also assigned to contracts that had settlements on November 29 with a strike price of $ 35,000.
This could be insurance in case the pro-crypto Republican Presidential nominee, Donald Trump, loses to the Democrat Vice President Kamala Harris who has not yet declared her stand on cryptocurrencies.
Another sign of extra timidity is that the aggregate open interest in CME Group Inc.’s Bitcoin futures is at the lowest it has been since May. Additionally, US Bitcoin exchange-traded funds (ETFs) are experiencing their longest string of net outflows as per Bloomberg data.
This resulted from her recent research note where Katie Stockton, a technical analyst from Fairlead Strategies LLC majoring in Bitcoin has adopted a ‘long-term neutral bias’. Market analyst at IG Australia Pty, Tony Sycamore also pointed out that risk-reward implications have shifted to a higher likelihood of a test of the $52k to $50k area.
The upward trend for Bitcoin weakened since this digital currency hit an ATH of $73,798 in the first quarter of the year. The short-term future still looks difficult to predict, more so because history shows that markets tend to dip in September. In the five years through 2023, Bloomberg data shows that Bitcoin has lost an average of more than 8% in September.
