Was the crypto market low this week? – This is what the data shows.
Bitcoin (BTC) rallied 21% below $49,577 on August 5. The recovery was also seen in the broader crypto market, with total market capitalization retaking the $2 trillion mark, up 20.5% since August 5.
Market participants are now looking for clues that the crypto market has bottomed out and started the first stages of a trend reversal.
Uncertainty may ease after the September FOMC meeting.
Some analysts believe investors are holding their positions until the Federal Reserve decides to cut interest rates at the next FOMC meeting, scheduled for September 18.
Although the Fed is widely expected to cut interest rates to between 5% and 5.25%, there is much uncertainty about the health of the US economy.
Fed Target Rate Odds for September 18 Source: CME Group
On September 12, the publication of the US Consumer Price Index (CPI) showed that inflation slowed year-on-year, while the September 12 Producer Price Index (PPI) showed a month-on-month increase in August. . Additionally, unemployment numbers came in at 230,750, compared to expectations of 227,000.
In the year Since the Fed's rate hike in 2023, interest costs have risen 23 percent in the first half of 2024. The central bank has said it needs to see more “good” inflation data, indicating inflation is on a sustained path to Fed 2. A goal before thinking about cutting interest rates.
Fed Chairman Jerome Powell's comments at the end of August confirmed that the time has come for the Federal Reserve to cut its key policy rate.
A key indication that the crypto market price correction may be reaching downwards from traditional markets. Prospects of improving macroeconomic conditions have made investors more speculative. The Russell 2000 index, which tracks small and medium-sized companies in the United States, has risen 4.3 percent in the past seven days. The S&P 500 index is up 3.56 percent from last week.
Emotional capital signals the bottom of the market
Extreme fear often signals a market crash as investors become more cautious about holding assets with a greater preference for fiat or stablecoins.
Experienced traders prefer to buy when sentiment indicators such as Alternative.me's Crypto Fear & Greed Index indicate high fear and when the indicator indicates greed.
According to the metric, high fear may be a sign that investors are too worried. However, since capital is moving from weak hands, it can provide a buying opportunity.
The current market sentiment is “fear”, the index is hovering at 32, below -20 readings in early August, which reflected “extreme fear”.
Crypto Fear and Greed Index readings below 20 indicate high fear. Source: Alternative.me
“Extreme fear” readings usually coincide with high sales in the past.
For the first time in 12 months, “the ratio of positive comments to the number of negative comments has doubled.”
“Bitcoin's positive sentiment suddenly rises to 1-year high, Ethereum is more moderate due to Vitalik concerns.” BTC and ETH positive and negative social media sentiment. Source: Santiment
The onchain data provider, however, warns that such a sudden change in crown optimism “is typically high when this level of FOMO is present.”
Look for “traders to freeze their rolls” and start redefining the FUD. As the public begins to channel skepticism again, BTC begins to test its March all-time high market values.
Related: MicroStrategy Adds 18,300 Bitcoin, Now Holds $14.14B BTC Value
Bitcoin mining capitulation
Bitcoin miners are ramping up their operations following the capitalization event earlier this month, with the network's hashrate reaching a new all-time high, according to data from onchain analysis firm CryptoQuant.
The Bitcoin network hashrate hit a new record high of 742 exahashes per second (EH/s) on September 1, recovering from a 10% drop in early July. Such expansion follows recent Bitcoin prices and a record-low hash rate – or average revenue per mining power. This is a sign of positive sentiment among miners after a lot of selling over the past few months.
Bitcoin hash rate. Source: CryptoQuant
Hashrate refers to the total computing power used to secure and verify new transactions on the Bitcoin network. Millions of calculations are solved every second to ‘win' new blocks, a process widely mined.
As the network's hashrate increases, so does the cost of Bitcoin mining, as miners are forced to use more power to upgrade to more powerful mining rigs, expand operations, and remain competitive.
Likewise, the difficulty of mining Bitcoin has reached an all-time high as shown in the chart below.
Bitcoin mining problem. Source: CryptoQuant
The increased hash rate and associated high difficulty level continue to pose a challenge to mining revenues. August 2024 represents the worst month in terms of miner profitability since September 2023, as major mining companies face revenue compression from multiple sources.
These reduced revenues and higher costs are pushing mining companies to consider more options to consolidate income and stay in business, while others choose to downsize their operations. This leads to a phenomenon known as mining, which is typically seen near the bottom of the area for Bitcoin prices during bull markets.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
