(Kitco News) – Investors were happy to see the shortened trading week come to a close as the ‘September curse’ remains in full effect, with stocks, cryptos, and precious metals all recording losses on Friday.
“This morning opened in the red across both equities and crypto markets,” noted analysts at Secure Digital Markets. “As expected, Bitcoin continues its downward trajectory, with a retest of the low $50,000 range appearing likely. The strong correlation with the equity market remains, prompting many funds and traders to likely consider [de-risking] given current price action and the short-term economic outlook.”
“U.S. job growth in August came in slightly below expectations, but many say not low enough to push the Federal Reserve toward a significant rate cut later this month,” they noted. “According to Friday’s Nonfarm Payrolls report, the U.S. added 142,000 jobs in August, below the forecasted 160,000, though still higher than July’s revised 89,000. The unemployment rate dipped to 4.2%, matching expectations and down from 4.3% in July.”
Regarding the jobs report and how markets will respond moving forward, Joel Kruger, Market Strategist at LMAX Group, said it depends on which aspect of today’s release the markets choose to focus on.
“If the market chooses to focus more on the discouraging NFP print, it will likely inspire a wave of risk-on flow as it increases the odds for a more investor-friendly 50-basis point rate cut from the Fed later this month,” he said. “In such a scenario, we believe this would be a net positive for cryptocurrencies given the expected uptick in investor risk appetite and less favorable US Dollar yield differentials.”
“On the other hand, if the market chooses to focus more on the hotter hourly earnings component within the jobs report, it could inspire a fresh wave of risk-off flow given the implication that higher earnings would keep the Fed worrying about inflation and the dangers associated with being overly accommodative,” he said. “In such a scenario, crypto assets could be more vulnerable to the combination of risk-off flow and more favorable US Dollar yield differentials.”
So far, traders have responded to the latest developments by pulling their funds from the markets.
At the closing bell, the S&P, Dow, and Nasdaq were all in the red, down 1.73%, 1.01%, and 2.55%, respectively. The day capped the worst week for the Nasdaq since June of 2022, while the S&P saw its worst week since March of 2023.
Data provided by TradingView shows that Bitcoin briefly spiked to $57,000 following the jobs data release, at which point bears took control of the price action and pounded BTC below $54,000 to its lowest price since the Japanese yen carry trade unwind at the beginning of August.
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $53,113, a decrease of 5.30% on the 24-hour chart. Spot gold has also struggled as the work week ends, trading at $2,496 per ounce for a decline of 0.80% on the session.
Bearish developments
The struggles for Bitcoin have led to the heaviest streak of outflows from spot BTC exchange-traded funds (ETFs) since May.
“U.S. spot Bitcoin ETFs saw their largest outflows since May 1st, with net outflows totalling $287.78 million on Tuesday,” said analysts at Secure Digital Markets. “BlackRock’s IBIT, the largest Bitcoin ETF by assets, reported no major inflows, while Grayscale’s GBTC, the second-largest, experienced $50.39 million in withdrawals.”
“Fidelity’s FBTC recorded the most significant outflows at $162.26 million,” they added. “Other notable funds, including Ark and 21Shares’ ARKB, saw $33.6 million withdrawn, while Bitwise’s BITB had $24.96 million in outflows. Additionally, ETFs managed by VanEck, Valkyrie, Invesco, and Franklin Templeton reported smaller withdrawals.”
Signs of stress also emerged in the derivatives markets as traders became more bearish.
“Examining various structures in Bitcoin’s derivatives market also provides insight into current market conditions,” the analysts said. “Bitcoin forward curves are showing annualized basis rates at their lowest levels of the year, with premiums of calendar futures to spot narrowing to 6%-9% (depending on expiration). This contraction in premium reflects reduced appetite for leveraged long positions (demand for cash leverage), indicating more cautious positioning by traders.”
According to Brian Dixon, CEO of OTC Capital, volatility in the crypto market will continue due to various factors, and market watchers will be keeping a close eye on ETF flows.
“The market is expected to remain volatile, with significant attention on how the new ETFs perform and how traditional investors adapt to crypto markets,” he said. “The U.S. presidential election could sway market sentiment, especially if pro-crypto policies are promised or enacted.”
“The trend of institutional money flowing into crypto, particularly Bitcoin, is likely to continue, in my opinion, bolstered by the ease of access through ETFs,” he added. “This could lead to a more stable, albeit still volatile, market as larger investors set the tone.”
“The crypto market in 2024 is at a pivotal juncture, marked by increased legitimacy through regulatory nods like ETF approvals, technological advancements, and growing institutional interest,” Dixon concluded. “While the immediate aftermath of the Bitcoin halving and ETF introductions have set a bullish tone, investors are advised to remain vigilant due to the inherent volatility and regulatory uncertainties. In my opinion, the market's trajectory seems promising, with potential for significant growth, but it's crucial to navigate with caution, considering the multifaceted influences at play.”
Altcoins get hammered
Only one token in the top 200 – Sui (SUI) – recorded a gain on Friday as Bitcoin’s plunge below $54,000 significantly reduced the risk appetite for crypto traders.
Daily cryptocurrency market performance. Source: Coin360
Sui’s (SUI) gain was minimal, increasing by 1.6%. Among the losers, ConstitutionDAO (PEOPLE) led the field, falling 11.8%, while Echelon Prime (PRIME) lost 9.5%, and Popcat declined by 9%.
The overall cryptocurrency market cap now stands at $1.87 trillion, and Bitcoin’s dominance rate is 55.9%.
