While Bitcoin was trading at $59,076 yesterday, it fell to $57,127 during the early Asian session today. BTC closed the week at $57,565, once again losing significant ground needed to form a bullish reversal. Several factors are at play in the trajectory.

#1: Macroeconomic Fears of Recession

The looming threat of a U.S. recession is causing palpable stress on financial markets. This is especially true for Bitcoin, which has yet to weather a full-blown economic crisis since its inception.

As the Federal Reserve prepares for the Federal Open Market Committee (FOMC) meeting on September 17-18, 2024, the discourse on monetary policy has intensified. Expectations for an interest rate cut were fueled by Jerome Powell’s comments at the Jackson Hole Symposium, and the CME FedWatch tool indicated a unanimous expectation of an adjustment in interest rates.

The breakdown of expectations shows 69% leaning towards a 25 basis point cut, while a significant minority of 31% predict a more aggressive 50 basis point cut. According to Tom Capital, a cryptocurrency analyst, such drastic cuts could be interpreted as signs of an economic crisis rather than just a correction, which complicates the investment outlook for Bitcoin.

“A 50 basis point cut by the Fed is an emergency cut, there’s just no other way to look at it. If your current bullish crypto rally thesis is based on big rate cuts, you might want to reconsider,” Tom Capital excellent via X. A similar sentiment was expressed by another analyst, Skew (@52kskew), who emphasized the importance of upcoming US economic data releases, in particular the BLS employment report, which is due on September 6.

Tom Capital added: “It would take some really bad payroll data ahead of Friday’s NFP, followed by a shocking NFP itself, to get 50 basis points higher (which is not out of the question given the unreliability of the data). However, I think a price shock from a bad NFP is a more likely risk move, starting with the US.”

#2: Bitcoin Seasonality

Rekt Capital, another cryptocurrency analyst, provided insight into the seasonal patterns affecting Bitcoin. Historical data dating back to 2013 shows Bitcoin’s mixed performance in September, with gains in some years offset by losses in others.

“Is September really a weak month for BTC? Since 2013, BTC has posted monthly returns of +2.35%, +6.04%, and +3.91% over three Septembers. And over the course of 6 Septembers, BTC has posted negative monthly returns ranging from -1% to -7.5%, with only two instances of double-digit declines (i.e. -19.01% and -13.38%). However, in macroeconomic terms, September is typically a consolidation month,” Rekt Capital analyzed.

#3: Low sentiment towards Bitcoin

Ali Martinez, analyzing on-chain data related to the exchange, pointed to a steady decline in investor interest and network usage. “The Exchange Volume Momentum indicator shows a steady decline in on-chain activity related to the exchange, which typically indicates lower investor interest in Bitcoin and reduced network usage,” Martinez he statedwhich suggests that enthusiasm for Bitcoin has waned somewhat, which could have a negative impact on its price.

Martinez added: “Bitcoin miners sold 2,655 BTC over the weekend, which is worth about $154 million!”

#4: Technical Terms of Trade

Bitcoin’s technical outlook is also bleak as the cryptocurrency failed to secure a mighty weekly close. “Bitcoin needs to close the week above ~$58,450 to protect the channel low and secure it as support during this retest. The price is currently trading at this support. An ideal close would be as high as ~$59,000 for BTC to break above the blue Higher Low from early July.” he noticed Rect Capital.

At the time of going to press, the BTC price was $58,036.

Featured image from iStock, chart from TradingView.com