The cryptocurrency market experienced its most intense decline of the year in the third quarter. Bitcoin (BTC), the sector’s flagship asset, saw its price drop to $52,598.70. BTC fell more than 8% in August, extending a bearish trend that began in September.
While Bitcoin’s outlook is bearish, many altcoins aren’t faring any better either. Ethereum (ETH), for example, fell to a low of $2,150.86, after a 7.67% drop over the past 30 days. With the market outlook bearish, it remains to be seen whether this trend will continue this month.
There are clues to judge whether a rebound is coming. However, the cryptocurrency market’s correlation with the US stock market could create a major headwind to watch.
Cryptocurrency Market and Macroeconomic Influences
As a subset of the broader financial market, the cryptocurrency market is typically influenced by Wall Street trends. In August, uncertainties surrounding the Federal Reserve’s interest rate cut shaped market trends.
This discussion was sparked by weaker inflation figures in the United States. According to a previous report, US PCE inflation stood at 2.5% in Julyunchanged from the previous month’s figure and below market expectations. In addition to the US economic data, other performance indicators, such as US employment data, also confirmed the improvement in the economy.
Based on these trends, Fed Chairman Jerome Powell said it was time to change course. Referring to lowering interest rates, he said the Fed would make this decision based on positive and sustained market data. Since he made this statement a few weeks ago, analysts have been speculating that the first rate cut would come this month.
Lower interest rates are a positive change for investors and, by default, for the broader cryptocurrency market. If this rate cut is implemented, investors will have access to more capital, which will free up liquidity in the economy. The resulting flooding of the economy with the US dollar is the ultimate trap for hedges like Bitcoin. With more liquidity in circulation, the purchasing power of the US dollar is reduced, making BTC and altcoins more attractive.
Uncertainties around this macroeconomic pivot continue to shake the market, but that could soon change.
Relying on internal catalysts
Different altcoins have unique fundamentals that can trigger their price rallies. Cardano launched the Chang hard fork on the mainnet earlier this month in an effort to foster decentralized governance. Despite this milestone, a recent ADA price analysis confirmed that the coin is stuck in a bearish wedge. Whether it breaks out of this trend largely depends on how Bitcoin performs this month.
With so many trends in the cryptocurrency market depending on Bitcoin, a definite trigger is needed. This could come from the Bitcoin and Ethereum spot ETFs in the US. Although outflows from Bitcoin spot ETFs in recent times have dampened sentiment, a reversal could come soon.
At the time of writing, Bitcoin price has rebounded to $54,704, up 1.2% in 24 hours. Its 24-hour low was $52,598.70 and it has climbed to a high of $54,757.45. With this slight uptick, there are signs that BTC’s correction is over for now as a potential bottom has been reached.
Godfrey Benjamin
Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the real-world applications of blockchain technology and innovations aimed at fostering the mainstream acceptance and global integration of this emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain-based media outlets and sites. Benjamin Godfrey is passionate about sports and agriculture. Follow him on TwitterLinkedin
Disclaimer: The content presented may include the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication does not assume any responsibility for your personal financial losses.
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