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Author: Markus Thielen, Founder and CEO of 10xResearch
It’s challenging to stay on top of all the events and news influencing Bitcoin prices. The Bitcoin rally lost momentum in July when President Biden was replaced as the Democratic nominee on July 21, 2024, reducing the election odds for the crypto-friendly contender Trump. Polls indicate a close race between the Democrats and the perceived crypto-friendly Republicans, causing rising Bitcoin volatility.
Additional selling pressure from market makers and crypto funds was observed on Monday and Wednesday, adding to the liquidation concerns for Ethereum. Bitcoin Spot ETFs have seen continuous outflows, with no significant stablecoin inflows, raising alarm about the market's direction. Although stablecoin issuer Circle received $1.5 billion in inflows this week, it also had outflows of $1 billion the week before, resulting in only marginally stronger inflows overall. Without significant stablecoin inflow, Bitcoin and crypto markets are perhaps being driven purely by macro data points and the correlation with technology stocks.
While the world focuses on the unwinding of the Japanese carry trade, the primary drivers of the U.S. tech sell-off are the lower-than-expected earnings growth and weakened profitability forecasts.
Even if the hype around the carry trade fades, the downside risk for the Nasdaq remains, potentially affecting Bitcoin’s price due to increasing Bitcoin/Nasdaq correlations.
Additionally, the selection of Trump's candidate for vice president, who is perceived as anti–Big Tech, adds to the uncertainty. Political headwinds could impact tech stocks and the crypto tech sector. Economic uncertainty, inflation concerns and potential interest rate cuts will persist until September of this year.
On Tuesday, Bitcoin attempted a rebound but faced strong resistance at $56,000–$57,000, following the Bank of Japan's pause on rate hikes as it assured investors during its press conference. The potential downside risk for Nasdaq remains, and Bitcoin could see further declines.
Recent earnings reports from major U.S. tech companies have prompted investors to reassess their positions. Weak margins from companies like SMCI and Google's 5% decline in network advertising indicate economic strain. Additionally, weak U.S. consumer credit data, driven by negative credit card debt and soaring delinquencies, suggests a collapsing personal savings rate, impacting the fiat-to-crypto onramp.
Comparisons to the 2020–21 bull run should consider the absence of Covid stimulus checks, which previously fueled crypto trading.
Historically, there’s a 44% chance of a U.S. recession in the first year of a new presidency, based on data collected since 1900, which could negatively impact stock prices and economic data. Despite declining consumer spending and advertisement revenue, the Fed's latest actions have signaled an acknowledgment of reduced inflation.
Upcoming vital events — including reports for the CPI on August 14, NVIDIA earnings on August 28, ISM® on September 2 and labor market on September 6 — along with Fed Chair Powell’s speech at Jackson Hole on August 22–24 — will be critical in setting market expectations.
Traders are expected to closely monitor these events for signs of a potential price reversal, and to gauge the continuation of the Bitcoin bull market.
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