(Kitco News) – Financial markets struggled to maintain their momentum in afternoon trading on Tuesday after stocks recorded their longest rally of the year to start the week as market watchers expect the Fed to announce larger-than-expected interest rate cuts once they decide to start lowering rates.
“Equities fluctuated on Tuesday as investors sought to sustain the momentum of a recent recovery rally,” said analysts at Secure Digital Markets. “Major indices have rebounded, supported by a sharp decline in market volatility since the start of the month.”
“Strong retail sales figures and a softer inflation report last week have alleviated concerns about the economy,” they added. “Both the S&P 500 and Nasdaq have posted gains of over 1% for the month, highlighting the market's dramatic turnaround.”
At the close of markets, the S&P and Nasdaq finished lower, down 0.20% and 0.33%, respectively, while the Dow was flat. Spot gold price hit a new all-time high of $2,529.60 in the morning, and at the time of writing, is up 0.42% on the session, trading at $2,514.
Data provided by TradingView shows that Bitcoin (BTC) briefly spiked above $61,000 in the early hours on Tuesday; however, bearish forces camping at the 50-day moving average managed to halt the advance and smashed King Crypto back to support at $59,000 in the afternoon.
BTC/USD Chart by TradingView
“As long as we remain below this key moving average, further declines toward the weekly lows appear likely,” Secure Digital Market analysts said.
“The upcoming U.S. elections have generated significant speculation about their potential impact on global financial markets, particularly within the crypto sector,” they added. “Notably, the so-called election expiry options on Deribit have seen a surge in open interest, exceeding $345 million, with over 60% focused on call options.”
At the time of writing, Bitcoin trades at $59,490, an increase of 0.49% on the 24-hour chart.
On the road to recovery
“BTC moved up two percent for the week to continue its market recovery after falling below $50,000 for the first time since February 2024,” said analysts at Bitfinex. “Unlike Ethereum ETFs, Bitcoin spot ETFs saw net positive inflows last week amounting to $32.4 million as the price continues to attempt a push past our range lows of around $60,000.”
They noted that after seeing significant outflows earlier in August, “spot Bitcoin ETFs recorded a net inflow of $32.4 million last week, signaling continued passive investor interest.”
“There was definitely some dip buying and profit taking across ETFs where investors took advantage of the sub $50,000 move to buy and then take at least partial profits over the past week,” they said. “This is in contrast to Ethereum ETFs, which recorded net outflows for the week despite a much sharper decline in Ether price than BTC price.”
But given everything that has occurred over the past couple of weeks, including the unwind of the yen carry trade, Bitfinex said, “BTC has held up surprisingly well to register a 7.1 percent trough-to-peak move after some downside on Wednesday and Thursday.”
Inflows into BlackRockʼs iShares Bitcoin ETF (IBIT) and Fidelity’s Bitcoin Fund (FBTC) have helped protect from further downside losses, which Bitfinex referred to as “‘passive’ demand, a term [they] utilize to define ETF inflows that are part of systematic investing in a price agnostic manner.”
“This divergence with investment flows into Ethereum ETFs reflects the broader market's confidence in Bitcoin as an asset, despite challenges such as the potential oversupply of BTC from large holders like the US government and Mt. Gox,” the analysts said.
“The contrasting fortunes of BTC and ETH ETFs highlight the different dynamics at play in these markets,” they noted. “While Bitcoin ETFs have managed to attract consistent inflows, Ethereum ETFs have struggled to maintain momentum. The drying up of Grayscaleʼs ETH supply could be a turning point for Ethereum ETFs, but the next few months will be crucial in determining whether demand can sustain this market.”
“It is also important to note that BTC is currently attempting to push past range lows after a breakdown from a four-month range,” they added. “Thus, we are at resistance and we do not expect any explosive move next with the lack of any potential catalyst and summer weakness and illiquidity remaining prevalent even now.”
Looking at the historical performance of Bitcoin following halvings, Bitfinex said the chart below “suggests that, despite the recent downturn, BTC is adhering to a similar trajectory as observed in past bull markets and halving cycles.”
“These patterns indicate that the cycles post-halving have typically seen significant rallies, even if they are preceded by short-term declines,” they said. “As of day 230 (August 17th) of the 2024 Halving year, the normalized return on a Year-To-Date basis is 1.38 (38 percent).”
“At the same stage, post-halvings in 2016 and 2020, we were at 1.32 and 1.68, respectively; thus, the current correction is nothing out of the ordinary, and although the most recent dip below $50,000 could have been the traditional final correction post-halving, we are still on track to follow past bull market trajectories, with potentially one more final correction in Q3, in line with the 2020 post-halving trajectory,” they noted.
“In that post-halving period, the cumulative normalized return corrected from 1.7 to 1.4 before the parabolic top seen in March 2024,” the analysts highlighted. “If we are to follow the 2016 trajectory then the current correction in Q3 after a Q2 top, with a significant move up from the yearly open in 2024 to March-April would be it. Thus, based on historical data, we can expect summer illiquidity to continue.”
“The broader macroeconomic environment, including potential Federal Reserve rate cuts, will also play a significant role in shaping future ETF flows for both BTC and ETH,” Bitfinex analysts concluded. “Investors should keep an eye on these developments, as they could provide further insights into the marketʼs trajectory.”
Altcoin’s rally higher
Altcoins harnessed the energy generated by Bitcoin’s spike above $61,000 to climb higher on Tuesday, with most tokens in the top 200 recording gains.
Daily cryptocurrency market performance. Source: Coin360
Meme token Brett (BRETT) saw the largest gains, climbing 18%, followed by increases of 16.4% and 12.3% for BitTorrent (BTT) and BinaryX (BNX), respectively. Litecoin (LTC) was the biggest loser, falling 3.3%, while dYdX (DYDX) lost 3.2%, and MANTRA (OM) declined by 2.6%.
The overall cryptocurrency market cap now stands at $2.11 trillion, and Bitcoin’s dominance rate is 55.8%.
