22.09.2023 05:10 PM
BTC/USD: Market sentiment has changed

If you like to ride, you should also enjoy pulling the sled. If Bitcoin grew thanks to the rally in U.S. stock indices at the start of the week until September 22, it logically had to fall at its finish due to the stock market crash. And that's exactly what happened, so the awakening of the crypto market turned out to be nothing more than an illusion. It remains dull and risks falling into even greater disgrace due to the changing balance of power in the global economy and financial markets.

Dynamics of Bitcoin and S&P 500

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Over the past nine weeks, capital outflows from crypto assets amounted to almost half a billion dollars, according to CoinShares research. At the end of the last five days, investors withdrew $54 million from the digital asset market. This includes $45 million, or 85%, from Bitcoin. Money continues to slip through their fingers as concern grows in the market. Cryptocurrencies have seen many positive news items, including victory over the Securities and Exchange Commission in court and new applications for Bitcoin-based ETFs. But unfortunately, all of this has not led to price growth.

Simultaneously, trading volumes on Binance are declining due to the introduction of fees for trading USDT on cryptocurrency exchanges and regulatory anger. Binance's share in the overall structure of centralized exchanges has dropped from 57% in March to the current 34%. Since the beginning of August, over 12,000 Bitcoins worth around $330 million and 198,000 Ether units worth $323 million have left the exchange.

Dynamics of trading volumes on Binance

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Thus, the pessimistic sentiment in the digital asset market has not disappeared, and BTC/USD quotes have returned to the trading range of 25,000–27,000. But has trading become as dull as it was in the summer? I don't think so. If Bitcoin managed to re-establish its old ties to the U.S. stock market, traders will soon try to pull it out of consolidation.

Currently, stock indices look quite vulnerable. Markets are getting used to the new reality, the fact that the Federal Reserve will keep the federal funds rate not just for a long time, but for a very long time. Treasury bond yields are rising, creating a serious headwind for the S&P 500. At the same time, a mass strike in the automobile industry, potential government shutdown, and the resumption of student loan payments could slow down U.S. GDP from 3.1% to 1.3% in the fourth quarter.

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If the stock market previously rose thanks to the strength of the U.S. economy and belief in the Fed's dovish pivot, that's not the case now. The previous advantages of stock indices have been lost, which increases the risks of a correction in the S&P 500. At the same time, global risk appetite is deteriorating, and the U.S. dollar is strengthening as a safe-haven asset. Should one be surprised by the coincidence of the 9-week capital outflow from the crypto market and the 9-week rally in the USD index?

Technically, the ability of BTC/USD bulls to hold above moving averages is a good sign for them. Returning to pivot levels at 26,980 and 27,160 with subsequent breakouts is a reason for buying. Conversely, a drop below 26,330 and 26,060 will open the door for selling.

Marek Petkovich,
Analytical expert of InstaForex
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