Bitcoin took a tumble below $54,000 on September 6th, with traders selling off their holdings in droves. The culprit? A mix of macroeconomic factors painting a gloomy picture for the future of Bitcoin.
A Weak Job Report and a Shaky Economy
The August job report came in weaker than expected, with only 142,000 new jobs added, compared to the predicted 164,000. While the unemployment rate remained at 4.2%, this news cast doubt on the strength of the US economy, raising concerns about risk assets like Bitcoin.
Adding to the bearish outlook, revisions to the July and June job reports showed even fewer jobs added than initially reported. This further solidified the perception of a struggling economy, which doesn’t bode well for Bitcoin.
A Rate Cut Seems Less Likely
The crypto market had been hoping for a rate cut from the Federal Reserve at their upcoming meeting, believing it would boost Bitcoin’s price. However, the weak job report makes a rate cut, especially a significant one, less likely. The Fed might not be in a hurry to cut rates anymore, as the labor market seems to be holding up better than initially feared.
Bitcoin’s Recent Struggles
Bitcoin had already been struggling at the start of September, with the markets still reeling from the Yen carry trade and volatility in the US stock market. This led to a significant price drop earlier in the week, wiping out over $1.05 million.
It’s worth noting that the July job report, which showed the lowest job additions in two years, and the Yen carry trade were also responsible for the August 5th market crash, which saw Bitcoin fall below $50,000.
A Short-Term Bearish Outlook?
Arthur Hayes, the co-founder of the BitMEX crypto exchange, predicted that Bitcoin would drop below $50,000 over the weekend, even opening a short position.
While the short-term outlook might seem bearish, some analysts remain optimistic. CryptoCon, for example, believes that Bitcoin is mirroring its price action from the 2016 market cycle and is gearing up for its next leg up, potentially reaching a new all-time high.
The Bottom Line
The recent drop in Bitcoin’s price is largely due to concerns about the US economy and the likelihood of a rate cut. While the short-term outlook might be uncertain, some analysts remain confident that Bitcoin will recover and continue its upward trajectory. Only time will tell what the future holds for the flagship cryptocurrency.
