Bitcoin (BTC) rose 4.3% between August 16 and August 18, but after failing to hold above $60,000, it reversed course. The price corrected to $58,500, and both the S&P 500 index futures and gold approached all-time highs on August 19. This suggests that the move is entirely cryptocurrency-related. However, it would be premature to attribute Bitcoin’s recent weakness to a single event, as the price struggled to close above $63,000 throughout August.
Strong macroeconomic data is not favorable for Bitcoin price.
Some analysts suggest that the recent weakness in Bitcoin is due to the unwinding of the carry trade in Japan due to rising interest rates. Other contributing factors include the risk of a global recession and the profitability of Bitcoin miners. It is important to evaluate whether these factors continue to suppress Bitcoin’s price and determine how long the $63,000 resistance level will last.
Renaissance Macro Research notes that the strength of the Japanese yen since mid-July has contributed to the weakness of Bitcoin and cyclical stocks, which rely heavily on debt leverage. The Japanese currency gained 12% against the US dollar between July 10 and August 5, causing market turmoil. However, the issue appears to have stabilized after Japan’s GDP grew at an annual rate of 3.1% in the second quarter.
Regardless of the impact of the Japanese carry trade on risk markets, Bitcoin investors are also significantly influenced by global socioeconomic expectations. For example, if there is an increase in perceptions of recession and layoffs, traders may reduce their exposure to cryptocurrencies. Conversely, if investors anticipate economic recovery, stocks generally perform well due to the positive impact on corporate earnings.
According to Yahoo Finance, Goldman Sachs, one of the world’s leading investment banks, has lowered its probability of a U.S. recession from 25% to 20% based on stronger-than-expected jobless claims and retail sales data. Jan Hatzius, Goldman’s chief U.S. economist, said in a note dated August 18 that the U.S. Federal Reserve should consider cutting rates by 0.25% in September, with a 0.50% cut also possible.
In addition to the possibility of a soft landing by the Fed, the Financial Stability Agreement was signed on August 19 between the U.S. Treasury and the Chinese central bank. According to CNBC, the cooperation discussed capital markets, cross-border payments, operational resilience, monetary policy, and sharing risk stress test reports for financial institutions. The cooperation has boosted investor confidence and eased concerns about a potential stock market crash.
Spot Bitcoin ETF Outflows and Miner Profitability Are Taking a toll on Investor Sentiment
In addition to the macroeconomic environment, Bitcoin’s own indicators have also contributed to the decline below $63,000. In particular, inflows into spot ETFs (exchange-traded funds) have shown a decline in institutional interest, with these products experiencing $372 million in outflows in the two weeks ending August 16, according to Farside Investors. Historically, inflows into spot ETFs have been a major driver of Bitcoin price gains, often signaling the entry of large traditional investment managers into the crypto market.
There have also been concerns raised about the declining profitability of Bitcoin miners, as these entities hold significant BTC reserves and may be forced to sell their coins to cover high energy costs. According to Glassnode data, miner balances currently stand at 1.8 million BTC, little changed from last month.
relevant: Bitcoin Miners Could Generate $13.9 Billion in Annual Revenue by Shifting 20% to AI and HPC — VanEck
The “hash price index,” which measures petahashes per day in USD, has fallen sharply since the April 19 halving, stabilizing at around $43 per petahash per day. This index indicates how much profit a miner can expect to make for a given hashrate. A lower index suggests lower profits. As a result, there are concerns that if the Bitcoin price remains stagnant for an extended period, less profitable miners may be forced to shut down operations.
In short, Bitcoin’s price weakness is due to stronger confidence in the global economy, lower demand for spot Bitcoin ETF products, and concerns that some miners may exit the market. Until these factors change, it is unlikely that Bitcoin will break $63,000 in the short term.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.