The bullish momentum that propelled Bitcoin (BTC) to a 57.8% year-to-date gain has all but vanished this week as Bitcoin price slid 9.1% in the past 7-days. Bitcoin price continues to trade below the 20-week exponential moving average of $27,750, a critical level to recapture in order to restart any semblance of bullish momentum.
The contraction in Bitcoin price has some analysts comparing the current BTC market to the pre-bull market cycle of 2015-2017.
Let’s take a closer look at the factors impacting Bitcoin price today.
Related: ‘Elegant and ass-backward’: Jameson Lopp’s first impression of Bitcoin
Bitcoin investor sentiment stalls
The start of 2023 saw traders with short positions continually dominating liquidations in the futures market. Bulls were caught off-guard on Aug. 17 when over $213.5 million of longs were liquidated. This marked the largest single day of Bitcoin long liquidations since the Terra Luna collapse in May 2022.
When BTC longs are liquidated without buying pressure from trading volume, Bitcoin price is negatively affected. Bitcoin volume has also hit the lowest levels since early 2021 and BTC Ordinals volume is down over 98%.
The absence of consistent trading volume has sent the Fear and Greed Index, a key investor sentiment gauge, into a downtrend in the last 30-days switching from neutral sentiment to fear.
The short-term uncertainty in the crypto market does not appear to have changed institutional investors’ long-term outlook. Despite a hostile U.S. regulatory environment, large institutions are pushing for Bitcoin financial instruments which may spark a bull run. Grayscale directly urged the SEC to approve all Bitcoin ETFs.
Despite the urgency of major financial firms, the SEC seems poised to continue to delay decisions on approving Bitcoin ETFs until 2024 and this could be negatively impacting investor sentiment and price action across the crypto market.
Bitcoin’s options continue to surge
Bitcoin’s market structure had been recovering since the start of 2023, but its recent price action has turned the market structure bearish. Despite the surging of Bitcoin open interest, there is a lack of consolidation above $30,000.
The surge in open interest is leading some analysts to believe a sharp correction back to $29,000 is possible.
Related: Bitcoin ‘overconfidence reigns’ but bulls must reclaim $27.8K — Trader
While some investors have speculated that BlackRock may be suppressing Bitcoin price ahead of their eventual ETF launch, the argument seems to be a conspiracy as they have more to lose from a BTC price crash.
Despite the current Bitcoin price downturn, Pantera Capital believes BTC could hit $148,000 by July 2025.
Will short term pain in macro lead to long-term gains in crypto?
Bitcoin price continues to be directly impacted by macroeconomic events, and it is also likely that further regulatory actions and interest rate hikes will continue having some effect on BTC price. This has led crypto VC inflows to drop by 10.26% according to Cointelegraph research.
Federal Reserve Chairman Jerome Powell is giving a speech on Aug. 25 in Jackson Hole that may give insight into whether the Fed will continue with aggressive interest rate policies.
Brian D. Evans, CEO of BDE Ventures, provided insight into how macro events can impact the current Bitcoin price action,
“Economic growth is still relatively steady, even if there are signs of weakness. Inflation is clearly falling. And central banks are clearly willing and ready to provide a tremendous amount of liquidity to bolster wobbling banking systems and stimulate faltering economies. I suspect, then, that we’ll experience a prolonged bout of sideways chop. And the permabears will once again be stuck on the sidelines when the market eventually takes the next leg upward.”
In the long term, market participants still expect the price of Bitcoin to recover, especially as more financial institutions are seemingly embracing BTC.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.