The bullish momentum that propelled Bitcoin (BTC) to a 55.7% year-to-date gain has all but vanished as Bitcoin price lost 11.4% in the past 30-days. Bitcoin price seemingly had bullish momentum after the Grayscale court victory against the SEC, but these gains have fully evaporated as the September losing streak continues.
The contraction in Bitcoin price has some analysts comparing the current BTC market to the pre-bull market cycle of 2015-2017.
Let’s take a closer look at the factors impacting Bitcoin price today.
Related: How to protect your crypto in a volatile market: Bitcoin OGs and experts weigh in
Liquidity disappears as Bitcoin investor sentiment stalls
The start of 2023 saw traders with short positions continually dominating liquidations in the futures market. Bulls were caught off-guard on Aug. 17 when a flash crash caused over $213.5 million of longs to be liquidated. This marked the largest single day of Bitcoin long liquidations since the Terra Luna collapse in May 2022.
Since the flash crash, the market has been in a perpetual state of capital outflows from risk assets like Bitcoin and Ether (ETH). Despite the strong volume at the start of 2023 for derivative markets, the risk appetite has substantially declined from 2021-2022 levels, shedding $6 billion on average daily.
Similar to the decrease in Ether derivatives volume, Bitcoin bulls are showing decreased interest. The reduction in open interest is leading some analysts to believe $22,000 is the next plausible step for Bitcoin price.
Despite the decrease in Bitcoin derivatives volume, over $8.76 million in longs were liquidated in 24-hours, and open options are skewed short, seemingly showing the bears are in control.
When BTC longs are liquidated without buying pressure from trading volume, Bitcoin price is negatively affected. Bitcoin volume has also hit the lowest levels since early 2021 and BTC Ordinals volume is down over 98%.
The absence of consistent liquidity and trading volume has sent the Fear and Greed Index, a key investor sentiment gauge, into a downtrend in the last 30-days switching from neutral sentiment to fear.
All eyes on Bitcoin ETFs
The short-term uncertainty in the crypto market does not appear to have changed institutional investors' long-term outlook. Despite a hostile U.S. regulatory environment, large institutions are pushing for Bitcoin financial instruments which may spark a bull run. Currently, 9 top investment firms have ETF applications pending with the SEC.
Despite the urgency of major financial firms, Bitwise has officially withdrawn their Bitcoin and Ether ETF applications. The SEC seems poised to continue to delay decisions on approving Bitcoin ETFs, including BlackRock’s application, until 2024. This could continue to negatively impact investor sentiment and price action across the crypto market.
While some investors have speculated that BlackRock may be suppressing Bitcoin price ahead of their eventual ETF launch, the argument seems to be a conspiracy as they have more to lose from a BTC price crash.
Related: BTC bull market began in March, more will realize in a year — Arthur Hayes
Even with the current Bitcoin price downturn, Pantera Capital believes BTC could hit $148,000 by July 2025.
Will short-term pain in macro lead to long-term gains in crypto?
Bitcoin price continues to be directly impacted by macroeconomic events, and it is also likely that further regulatory actions and interest rate hikes will continue having some effect on BTC price. Even as China ruled that virtual assets are legal property on Sept. 1 and OKX exchange is in the final stage of the Hong Kong VASP license, Bitcoin price continued to drop.
Federal Reserve Chairman Jerome Powell also gave a speech on Aug. 25 in Jackson Hole that provided insight that the Fed will continue with aggressive interest rate policies for as long as it takes to tamp down inflation.
In the long term, market participants still expect the price of Bitcoin to recover, especially as more financial institutions are seemingly embracing BTC.
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