Bitcoin Stumbles at $64,000: Macroeconomic and Geopolitical Headwinds PrevailAfter nearing $64,000, Bitcoin appears to have encountered a temporary resistance. The cryptocurrency fell back above $62,000 in early trading today (August 8th), and currently, it has slightly recovered to $62,400
Bitcoin Stumbles at $64,000: Macroeconomic and Geopolitical Headwinds Prevail
After nearing $64,000, Bitcoin appears to have encountered a temporary resistance. The cryptocurrency fell back above $62,000 in early trading today (August 8th), and currently, it has slightly recovered to $62,400. Uncertainties in the macroeconomy and geopolitical landscape continue to pose significant hurdles for the short-term outlook. Market expectations for a Fed rate cut have diminished, and this week will bring crucial economic data releases, including the Consumer Price Index (CPI) and the beginning of earnings season, all of which will impact Bitcoin's price.
Why Has Bitcoin Been Struggling Recently?
For the past eight weeks, Bitcoin has been unable to break through the $66,000 threshold, primarily due to the following factors:
- Global Economic Growth Uncertainty: Risks of a global economic slowdown persist, leaving investors apprehensive about the future, putting pressure on risk assets like Bitcoin.
- Escalating Tensions in the Middle East: Geopolitical tensions in the Middle East are on the rise, fueling risk aversion in the market and consequently affecting the price of Bitcoin and other risk assets.
- Uncertainty Surrounding the U.S. Presidential Election: The outcome of the U.S. presidential election will have a significant impact on economic policies and market sentiment. Investors may choose to adopt a wait-and-see approach until the election result becomes clear.
- Weakening Expectations for Fed Rate Cuts: Robust U.S. employment data in September, exceeding expectations, reduced the likelihood of a recession and diminished expectations for Fed rate cuts. CME Group's FedWatch data shows that the market's probability of a 25 basis point rate cut at the next Federal Open Market Committee (FOMC) meeting has plummeted from 40% two weeks ago to 0%. A high-interest rate environment tends to favor safe-haven assets, which is detrimental to Bitcoins price.
Impact of China's Economic Stimulus Measures
China's latest economic stimulus measures have reduced demand for alternative safe-haven assets, including Bitcoin. The Hang Seng Index has even hit a 32-month high, while the S&P Index is down 0.5% from its all-time high.
Bitcoin Futures Balance and ETF Outflows
The annualized premium for Bitcoin futures remains around 8%, suggesting a relative balance between bullish and bearish forces. Moreover, since October 1st, Bitcoin spot ETFs have seen net outflows of $335 million.
Upcoming Key Data and Events
This week, the U.S. will witness earnings season and significant economic data releases, which may also contribute to investors' cautious stance.
- Consumer Price Index (CPI) and Producer Price Index (PPI): The U.S. will release September CPI and PPI on October 10th and 11th, respectively. These two indicators are crucial measures of inflation and directly impact the Feds rate-cutting policies. If CPI and PPI decline, indicating easing inflation, the Fed might consider further rate cuts, which would be favorable for economic growth. Market expectations are for September CPI to moderate to 2.3% year-on-year and 0.1% month-on-month. However, due to stronger-than-expected September non-farm payroll data, expectations for rate cuts this year have significantly diminished. If inflation remains sticky and October non-farm payroll data is relatively strong, the Fed could pause its rate-cutting plans.
- U.S. Earnings Season: Earnings season will begin this week. Financial giants like JPMorgan Chase, Wells Fargo, and BlackRock will be among the first to release their earnings reports, which will directly impact the financial sector and serve as a barometer for the health of the U.S. economy.
Outlook for Future Movement
As Bitcoin remains sensitive to macroeconomic and geopolitical shifts, this week's economic data and company earnings could significantly influence its price. Investors should closely monitor market developments.
Conclusion
Bitcoin has recently encountered resistance around the $64,000 level, mainly due to macroeconomic and geopolitical uncertainties, along with diminishing expectations for Fed rate cuts. The upcoming CPI data and earnings season this week will bring renewed volatility to the market. Investors should stay vigilant and exercise caution in their trading activities.
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