Cryptocurrency markets are facing pressure on multiple fronts as the US election, mixed macroeconomic data and pessimistic sentiment from cryptocurrency exchange-traded fund (ETF) outflows weigh on prices, according to a recent report from Nansen.
Wide sense of surrender
U.S. spot-traded Bitcoin (BTC) and Ethereum (ETH) ETFs have seen negative flows for the second week in a row. While Bitcoin ETFs have lost more than $983 million over the past two weeks, Ethereum ETFs have lost $103.5 million over the period, according to data from Farside Investors.
This coincided with a sharp decline in the total supply of stablecoins from August 26 to September 7, when approximately $450 million left the market. According to the report, this rare event in 2024 could signal investor capitulation, unlike the previous sell-offs in March and August.
Additionally, institutional interest in Ethereum-based products has waned, with VanEck shutting down its Ethereum Strategy ETF after less than a year and WisdomTree withdrawing its spot Ethereum ETF application with the U.S. Securities and Exchange Commission (SEC).
As a result, Nansen’s risk management indicators show negative BTC price momentum, while the BTC call-put spread is barely risky, suggesting a neutral market position.
Additionally, Bitcoin is testing its 50-week moving average, while Ethereum is challenging its 200-week moving average, both critical support levels.
Elections and uncertainty
The US presidential election is expected to create uncertainty for risk assets, such as cryptocurrencies, through November. Markets may be underestimating the impact of a potential “Democratic wave,” which could lead to higher corporate and capital gains tax rates.
Yet, it could all come down to today’s debate bringing a bit of a breather to cryptocurrency prices, with Harris’ lead in the polls potentially being hurt by a poor showing.
Macroeconomic data show weakness in manufacturing activity in the eurozone, China and the United States, as well as a slowdown in the US labor market.
While services and consumer spending remain stable, declining savings among less affluent households could impact future consumption.
This situation presents an ambiguous picture, in which it is difficult to determine whether the global economy is slowing its growth or is slowly sliding towards a recession. In addition, the rate cuts planned by the Federal Reserve, which the markets are pricing in 225 basis points by 2026, may not be enough to stimulate growth in all sectors.
The mismatch between asset price expectations and the current slowdown in growth poses a risk to investors, particularly those interested in value stocks. This uncertainty therefore also reduces risk appetite in the market.
