(Kitco News) – Bitcoin (BTC) bulls are looking to pick up where they left off on Monday, setting their sights on resistance at $58,000 on Tuesday after a late-night attempt to retake the level was rejected, resulting in BTC pulling back below $57,000.
BTC/USD Chart by TradingView
“The turnaround in sentiment on the US markets saw the crypto market capitalization rise by 3.2% in 24 hours to reach $2 trillion,” noted Alex Kuptsikevich, senior market analyst at FxPro. “However, it is too early to talk about a reversal in growth, as this level could prove resistant to intensified selling. The Cryptocurrency Sentiment Index rose to 33, the highest since late August, but is still in the 'fear' zone.”
“Bitcoin posted an impressive 7% gain on Monday but corrected some of the gains early in the new day, adding 4% in 24 hours,” he added. “The technical picture remains supportive of a rebound, but buyers are being cautious and taking profits quickly.”
Kuptsikevich said the choppy price action of late is likely to continue in the near future as the countdown to the first rate cut stands at eight days, though many analysts say that a 25 bps cut is already priced into markets.
“In our view, caution and a tendency to sell growth will prevail in the market, at least until the release of US inflation data on Wednesday,” he said. “This could continue until the Fed's interest rate decision on September 18th.”
Along with cryptos, stocks also got the week off on strong footing as investors look more open to risk with the prospect of the first interest rate cut on the horizon.
“US stock indices put in a solid performance yesterday. They opened in positive territory, rallied throughout the day and ended near their highs,” said David Morrison, Senior Market Analyst at Trade Nation. “It was a good start to the week and went some way to offset last week’s heavy losses which were compounded by Friday’s weaker-than-expected payroll numbers. These helped to push the US majors down to levels last seen in mid-August.”
“So yesterday’s recovery has helped to restore some confidence, even as we approach this week’s inflation numbers, tonight’s Presidential Debate and next week’s interest rate decision from the Federal Reserve,” he added.
“It’s worth taking a step back to consider what these events mean for the markets. Given comments from Fed Chair Jerome Powell at last month’s Jackson Hole Economic Symposium, and those from FOMC members Christopher Waller and John Williams yesterday, it’s fair to say that everyone expects the Fed to cut rates at next week’s meeting,” Morrison noted. “It sounds as if most FOMC members, and certainly Jerome Powell, believe that inflation is trending ‘sustainably’ back towards the 2% target. That being the case, recent evidence of a loosening in the employment picture gives the Fed all the evidence it needs to make its first rate cut in over four years.”
“So, tomorrow’s CPI release, and Thursday’s PPI have dropped in significance when compared to previous updates, although the data could influence expectations over the size of cuts for the rest of this year,” he said. “There’s still a bit of uncertainty concerning the size of next week’s cut. But it looks as if investors are now coalescing around 25 basis points as the most likely outcome. The feeling is that a 50 basis point cut would have everyone worried that the Fed knows something unpleasant that the rest of us don’t.”
According to Morrison, “The only thing that can’t be predicted with a decent level of certainty is how tonight’s debate will go between Harris and Trump. For now, that’s unlikely to be a major market mover.”
“Yet we’re approaching ‘decision time’ for US equity markets,” he concluded. “Yesterday’s bounce has taken the majors back up towards a first line of significant resistance. If the S&P can break above 5,500 convincingly and hold it as support, then further gains are possible. But a failure at this level raises the probability that US stock indices loop lower once again.”
As for the Harris-Trump debate, Yongjin Kim, CEO of Flipster, said the crypto community will be closely watching to see if Bitcoin or digital assets are mentioned in a meaningful way.
“With the Harris-Trump debate [approaching], the buzz surrounding crypto policy is reaching new heights,” he said. “Trump has been much more vocal on the subject. His track record includes pledging support for the crypto industry through various proposals such as firing SEC Chair Gary Gensler, establishing a National Bitcoin Stockpile, and opposing central bank digital currencies (CBDCs). On the other hand, the Harris camp has remained relatively silent on crypto policy, making it difficult to gauge their stance.”
“Historically, Trump’s pro-crypto stance has been well-received by traders and investors, so any clear outperformance during the debate could create a knee-jerk positive reaction in the crypto market,” Kim said. “A short-term bullish movement within the crypto markets might follow.”
“Indicators worth watching post-debate include prediction markets like Polymarket, which offer insight into how the public perceives the electoral outcomes,” he added. “Although the effect would likely depend on how stark the contrast is between the candidates’ debate performances. Additionally, broader factors, such as changes in the Federal Reserve’s monetary policy or ETF flows, will also continue to influence market sentiment leading up to the election.”
And it's not just the retail crypto crowd that is keeping close tabs on what the presidential candidates say about crypto, Kim said, as institutional investors are chomping at the bit to incorporate more digital asset products into their offerings.
“As the election approaches, institutional investors are likely to be watching for signs of a more crypto-friendly administration,” he concluded. “For instance, the filing of Solana spot ETF filing, or the intention of TradFi custodian banks to move into the crypto custody business, are all signs that they are interested in incorporating crypto as part of their main business offerings under the right political environment. The positive outcome of the election will likely shape the long-term trajectory for crypto policy, accelerating crypto adoption.”
At the time of writing, Bitcoin trades at $57,114, an increase of 3.53% on the 24-hour chart.
