The recent trading action of Bitcoin indicates that the cryptocurrency might face challenges for another month. As traders eagerly await a clear direction on U.S. interest rate cuts and the upcoming presidential election, Bitcoin experienced a tough month in August. The leading cryptocurrency saw a significant 10.25% drop, marking its worst performance since April. Meanwhile, Ether also struggled, falling by 23.66%, its third consecutive monthly decline and the worst month since June 2022. This discrepancy suggests that while Bitcoin had some success with ETFs in 2024, the rest of the cryptocurrency market is lagging behind and facing difficulties.
According to chart analyst Rob Ginsberg from Wolfe Research, the current state of the crypto landscape is not looking favorable. Bitcoin remains stuck in a descending trading range, gradually declining from its March high. Ginsberg predicts that Bitcoin might revisit the bottom of this range in the low $50,000 region in the coming weeks. The trend for Bitcoin has been showing signs of deterioration since March, with lower highs and lower lows becoming more apparent. Unless there is a breakout or a gradual reversal, the bearish outlook on the near to mid-term direction of Bitcoin’s price is likely to continue.
Historically, September has been a challenging month for Bitcoin, with the cryptocurrency finishing lower in eight of the last 11 Septembers. This trend of September being a tough month extends to other markets like U.S. stocks as well. Bitcoin has been consolidating in a range between $50,000 and $70,000 since April, and this consolidation is expected to continue for at least another month. While supply overhangs in Bitcoin were a significant factor contributing to the tough market conditions in August, these issues have mostly been resolved or abated.
Alex Thorn, head of research at Galaxy Digital, highlighted that much of the U.S. government bitcoin supply that was recovered from theft is likely to be returned instead of sold. Additionally, supply issues from sources like Germany’s selling of Bitcoin, Mt. Gox estate distributions, and bankruptcies returning coins to creditors have been addressed. From a supply standpoint, Bitcoin seems to be in a good position for future movements. Thorn also mentioned that a positive catalyst could come from FTX cash distributions, which are expected to begin within the next six months. This distribution could inject cash into the market, potentially benefiting the sector.
As the U.S. presidential election nears, the uncertainty surrounding the outcome is weighing heavily on investors. Thorn suggested that Bitcoin could remain rangebound until as late as November due to the election. He mentioned that a Trump victory might act as an upside catalyst, while the impact of a Harris victory is expected to be minimal. With rate cut expectations and election results still unclear, analysts like John Todaro from Needham believe that more clarity is needed before the market can move decisively.
The future of Bitcoin trading appears to be challenging in the coming months. With uncertainties surrounding U.S. interest rate cuts, the presidential election, and market trends, Bitcoin could face continued volatility and struggle to find a clear direction. Traders and investors alike will need to closely monitor developments in the market to navigate these challenging times.