(Kitco News) – Asset prices rebounded higher in trading on Monday following a volatile week that saw Bitcoin (BTC) retest the lower support bound of the range it has been trading in since late February, while the S&P 500 recorded its worst week since early 2023.
“Last week saw significant volatility for Bitcoin,” noted analysts at Secure Digital Markets. “BTC kicked off the week near its peak at $59,860, only to close at a low of $52,500, marking a sharp 12.5% drop. However, Saturday brought some relief as prices began to climb, retracing about 50% of the downward move. Ethereum (ETH) found key support at $2,150 and is currently trading at $2,305.”
“While short-term momentum appears to be gaining, it’s too early to declare a bullish reversal,” they added. “Daily candles are yet to confirm a sustained recovery, and September has historically seen retests of market lows. That said, the longer-term outlook remains promising, with higher time frames slowly indicating that a bullish reversal might be on the horizon.”
Data provided by TradingView shows that after bouncing off a low of $53,629 on Sunday afternoon, Bitcoin bulls steadily pushed the price action higher until a Monday afternoon surge led to a spike above $57,000, which has acted as resistance since Sept. 3.
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $56,957, an increase of 5.02% on the 24-hour chart. While BTC is showing encouraging signs on Monday, analysts at Secure Digital Markets noted that “As uncertainty grows with the U.S. election approaching on November 8th, we expect volatility to remain elevated, particularly for short-dated maturities.”
As for stocks, the major indices all trended higher, with the S&P, Dow, and Nasdaq finishing the day up 1.16%, 1.20%, and 1.16%, respectively. At the time of writing, spot gold is up 0.37% and trades at $2,506.40 per ounce.
Bitcoin’s fate correlated with the S&P
“The first week of September saw BTC continue the decline that began for the asset in late August, with the price dropping to $52,756 on Friday, September 6th,” noted analysts at Bitfinex. “This placed BTC below the notable low of $56,711 that was recorded on May 1st - a significant level on the charts.”
“The May 1st low is important for a multitude of reasons,” they said. “Historically, the previous two instances when prices dipped to this level, a swift recovery ensued, with prices rebounding within just 23 days.”
“May 1st was also a critical point in market dynamics as global open interest (OI) for BTC-related trading pairs hit its first significant trough, following the OI all-time high (ATH) of $39.03 billion seen on March 29th,” they added.
The analysts noted that “Falls below such a significant level are typically associated with a leverage wipeout, with large liquidations, or stop-outs, of highly leveraged long positions, particularly in altcoins.”
“Such movements purge speculative excess in the market, and can reset price levels and potentially lay the groundwork for future stability or price appreciation,” they said. “Since the BTC ATH of $73,666, the currency has been on a downtrend, with three significant price corrections, as shown in the figure below: on May 1st, July 5th, and August 5th, respectively.”
The analysts highlighted that “each of these lower lows has corresponded to a decrease in open interest.”
“At the time of writing, the price of BTC is $54,300, and OI is around $28.43 billion,” they said. “BTC is up about 10.4 percent from the August 5th low, while the OI is up 6.67 percent as per Coinglass data. This shows a healthy correlation between price and OI, suggesting that leverage is currently not significant in the perpetual markets.”
They said that while this indicates “prices could range or move up from current levels” unless there is “significant spot selling/derisking,” they warned that further downside could still be in the cards.
“Our general thesis of a bearish September for BTC remains valid, with continued recession concerns and a post rate cut sell-off potentially triggering more de-risking in traditional financial markets and a downturn for the SPX,” they said. “We see the movement of BTC tied to the performance of US equities.”
“Our view is that a major root cause of the sell-off of BTC last week was caused by a downturn in the S&P 500,” they added. “The SPX closed the week down 4.25 percent, the worst weekly performance for the index since March 2023.”
“The correlation between the S&P 500 and Bitcoin has persisted, even though the decline in BTC was notably less than that of the SPX last week,” they noted. “While the SPX, which has a market capitalisation of $45.8 trillion, fell 4.25 percent, BTC, with a market cap of $1.07 trillion, fell only 5.45 percent. For context, in the last week of July (starting July 28th), the SPX declined 2.06 percent while BTC fell 14.9 percent during the course of that week.”
The analysts suggested that this “reduced sensitivity to equities' downward movements could be indicative of seller exhaustion in the Bitcoin market and supports the thesis that traditional finance investors tend to de-risk from perceived tail risk assets like cryptocurrencies before equities in response to market downturns.”
That said, they warned that they still “see the link between the two asset classes as remaining intact.”
“For Bitcoin to experience some upside in the upcoming week, it is essential for the US equity markets to find some stability or positive momentum, potentially leading to a decrease in ETF outflows,” they concluded. “This relief in the equity markets could help alleviate selling pressure on Bitcoin, providing a conducive environment for a recovery. As such, monitoring both equity market trends and cryptocurrency-specific dynamics will be crucial.”
According to TradingView analyst Arman Shaban, if Bitcoin’s price cannot break above $57,870, “we will likely see further declines”
“The potential targets for this drop are $50,750, $49,000, and $44,100,” he said. “After a short corrective wave, we may witness a significant upward move in Bitcoin, with targets above $80,000.”
Altcoins rally higher
Altcoins largely rebounded alongside Bitcoin, with all but a dozen tokens in the top 200 recording gains on Monday.
Daily cryptocurrency market performance. Source: Coin360
Rocketpool (RPL) was the biggest gainer, increasing by 23% to trade at $11.43, followed by gains of 18.4% and 18.2% for ConstitutionDAO (PEOPLE) and Popcat (POPCAT), respectively. Helium recorded the biggest loss, falling 3.9%, while BitTorrent (BTT) dropped 3.7%, and UNUS SED LEO (LEO) declined by 3.2%.
The overall cryptocurrency market cap now stands at $2.5 trillion, and Bitcoin’s dominance rate is 50.1%.
