Bitcoin and Ether took a serious tumble on Sunday, hitting notable lows as last week’s hotter-than-expected U.S. macro data continued to haunt crypto investors. I mean, it's never fun to watch your favorite digital assets take a hit, right?
Bitcoin dropped by 2% in just one day, now trading at around $115,230, according to HodlFm's price page. At one point, it even dipped to $114.878. This is a far cry from its record high of about $124,350 just last Wednesday, which is a 7.5% drop. Ether didn't fare much better, dropping 5.62% to land at $4,259.
Inflation and Investor Sentiment
"Bitcoin’s recent dip reflects cautious investor sentiment amid hotter-than-expected U.S. inflation," said Vincent Liu, CIO at Kronos Research.
Higher inflation? Yeah, that’s no friend to crypto. It reduces hopes for Fed rate cuts, strengthens the dollar, and fuels a bit of a risk-off attitude among investors. No surprise there.
Bitcoin’s record rally, which was triggered by some cooler-than-expected U.S. CPI data, came to an abrupt halt when the following PPI data for July showed a 3.3% year-over-year growth. That’s way higher than what analysts were expecting, and definitely not the kind of news that fuels investor optimism. Analysts believe that this squashed hopes for any interest rate cuts in September, leaving a lot of traders a little hesitant.
Traders Are in “Wait-and-See” Mode
"Traders are holding back, waiting for clearer macro and crypto signals before re-entering the market," Liu added.
I’m sure a lot of us can relate to that sentiment, sitting on the sidelines, waiting for the right moment.
Oh, and then there’s U.S. Treasury Secretary Janet Yellen’s comments about the government not purchasing Bitcoin for its strategic reserve. Instead, she mentioned exploring a more "budget-neutral" way to expand the reserve. That definitely didn’t help the mood in the crypto space.
Investors in a “Neutral” State
On the bright side, CoinMarketCap’s fear and greed index shows a neutral reading of 56, which means investors are kind of in a wait-and-see mode. No major panic yet, but also no crazy excitement.
However, Rachael Lucas, a crypto analyst from BTC Markets, thinks this downturn is more about capital rotation than a complete collapse of investor faith. Last Friday saw some funds leaving Grayscale and Ark Invest’s Bitcoin ETF, but BlackRock’s IBIT continued to see net inflows. It’s like a game of musical chairs, but with ETFs. So, don’t count out the market just yet.
Key Support Levels and the Risk of a Further Drop
According to Lucas, the key support levels are around $115,000 and $112,500. If Bitcoin breaks below those, we could be looking at a slide toward $110,000, which could have some folks nervous.
Looking ahead, the next big thing on everyone’s mind is the U.S. macroeconomic events. Specifically, the Jackson Hole Symposium later this week, where a dovish tone could spark renewed risk appetite. If the Fed speaks kindly, maybe Bitcoin and Ether will get their groove back. Lucas also pointed out that sustained ETF inflows and corporate allocations could act as a safety net for the market.
Gunel Ismayilova
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