(Kitco News) – Financial markets experienced a volatile day of trading on Wednesday after prices unexpectedly dipped into the red following the release of the latest Consumer Price Index (CPI), which was in line with expectations and showed that inflation continues to cool.
The pullback was brief for equities, however, as stock prices climbed higher as the day progressed, buoyed by the latest indication that the Federal Reserve has all the positive data it needs to support an interest rate cut in September.
“With the annual inflation rate dipping to 2.9% – the lowest since 2021 – investors are feeling more optimistic,” said analysts at Secure Digital Markets. “This drop from 3% in June has sparked hopes for a rate cut at the central bank’s September meeting, adding fuel to the recent buying spree following early August’s pullback.”
At the closing bell, the S&P and Dow finished up 0.38% and 0.61%, respectively, while the Nasdaq was flat.
While stocks trended higher, cryptos struggled as several developments – including the transfer of 10,000 Bitcoins by the U.S. government to a wallet controlled by Coinbase – sparked concerns that another major sell-off was imminent.
“The crypto market's feeling the heat today, with some notable moves stirring the pot,” Secure Digital Markets said. “Jump Trading is back at it, offloading ETH – 17,049 $ETH to be exact, worth about $46.44M – after pulling it from Lido. Meanwhile, whispers in the market suggest the U.S. government recently shuffled around 10k BTC. With Bitcoin still stuck under its 20-day, 50-day, and 200-day moving averages, the bears are eyeing a further dip, targeting 57,500. If that level breaks, we could see pressure mount towards 55,000.”
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $59,100, a decrease of 2.90% on the 24-hour chart.
Gold has also sold off despite optimism about a rate cut in September and currently trades at $2,446.90, a decrease of 0.70% on the session.
Bull run to extend into 2025
While Bitcoin struggles to overcome headwinds in the short term, analysts at ByBit see the bull run that started at the beginning of 2023 extending into 2025.
“Our analysis indicates that the current bull market has been ongoing for approximately 624 days, with a trough-to-all-time-high peak of 3.5x,” ByBit analysts said in a report released Wednesday. “This is significantly lower than the 20x trough-to-peak ratio observed in the previous cycle, from 2019 to 2022. However, based on the limited historical data of just three prior cycles, the average suggests there may be an additional 350 days remaining in the current run to surpass the previous peak.”
“Our analysis of Bitcoin's historical boom-and-bust cycles reveals a consistent pattern,” they added. “In each previous instance, the broader altcoin market capitalization has risen in tandem with Bitcoin's run to new all-time highs (ATHs), only to then peak following Bitcoin's subsequent crash.”
“However, the current situation is different,” they noted. “Bitcoin's price peaks haven't been accompanied by the typical increase in market share for Ethereum (ETH) and other altcoins. Furthermore, Bitcoin itself hasn’t continued pushing to successive new highs; instead, it’s been trading within a relatively tight range for the past four months.”
“These observations suggest the current market rally may not have yet reached a true peak, unlike the typical pattern seen in previous Bitcoin bull and bear cycles,” the analysts said. “The lack of altcoin exuberance, and Bitcoin's consolidation (rather than continued record-setting ascent), imply the current market dynamics differ from past cycles.”
They also found that several macroeconomic factors that have historically influenced the price of Bitcoin have had limited impact during this cycle.
“For example, historically, loose monetary policy and a weaker U.S. dollar have acted as tailwinds for Bitcoin,” they wrote. “Yet, despite the absence of these conditions in the present environment, Bitcoin is still experiencing a robust rally.”
“Additionally, personal savings rates have previously shown a positive correlation with Bitcoin's bull runs, but this relationship isn’t manifesting this time around,” they noted. “These observations suggest that current Bitcoin market dynamics are deviating from the patterns observed in prior boom-and-bust cycles.”
The analysts highlighted that Bitcoin’s price peak in March coincided with the end of heavy inflows into spot Bitcoin exchange-traded funds (ETFs), saying, “Immediately after this price peak (and continuing since), the pace of capital inflows into BTC Spot ETFs stopped abruptly.”
“This suggests the pool of new institutional demand had been temporarily saturated,” they said. “Crucially, this drop-off in fresh demand then impacted Bitcoin's spot price response to Apr 20, 2024, halving event one month later.”
“From these observations, institutional demand has been a key driver of Bitcoin's price action during this cycle,” the analysts said. “Changes in the flow of institutional capital into BTC Spot ETFs directly corresponded with the cryptocurrency's broader market dynamics, including the peak and subsequent price movements.”
But with history showing that the biggest run-up for Bitcoin typically comes after the halving, ByBit analysts said “we may still see Bitcoin’s price continue to rise.”
“The currently downbeat market sentiment may not necessarily indicate an end to the ongoing Bitcoin bull run,” they said. “One clear conclusion from the behavior of derivatives markets in the previous Bitcoin cycle is that dips in sentiment, even to relatively low levels, don’t always signal the conclusion of a bull market. In fact, the eventual peak of the 2021 cycle was achieved after a near-systemic blow to Bitcoin's hash power, which saw sentiment plummet to historically low levels before the market recovered and continued its ascent.”
“This historical precedent suggests that the current depressed sentiment observed in the market may not be an accurate predictor of an imminent end to the present Bitcoin bull run,” they concluded. “The derivatives data tracked by Block Sholes implies that the current downbeat mood could be temporary, and doesn’t necessarily portend the conclusion of the crypto's current uptrend.”
Reversals of fortune of altcoins
Altcoins suffered a reversal of fortune from the previous two days of gains as 85% of the tokens in the top 200 recorded losses on Wednesday.
Daily cryptocurrency market performance. Source: Coin360
Toncoin (TON) managed to rise above the noise to post a gain of 8.5%, followed by increases of 8.3% and 5.3% for Aave (AAVE) and Notcoin (NOT), respectively. Ironically, Safe (SAFE) was the biggest loser, falling 8.1%, while Celestia (TIA) lost 7.9%, and ConstitutionDAO (PEOPLE) fell 7.4%.
The overall cryptocurrency market cap now stands at $2.09 trillion, and Bitcoin’s dominance rate is 55.7%.
