Rania Gule, Senior Market Analyst at XS.com, highlights the complexities of the current market. “While Bitcoin’s recent gains are encouraging, supported by forecasts and institutional interest, September has traditionally been a tough month for cryptocurrencies,” she notes. “The historical pattern of negative returns in September adds a layer of caution to the current optimism.”
In August 2024, cryptocurrency traders saw realised gains of $4.251 billion, marking a notable improvement in the Net Profit/Loss (NPL) metric for Bitcoin. Gule believes that this uptick reflects better financial conditions for traders, although it could also lead to short-term volatility as profit-taking becomes more widespread. A key indicator of market sentiment, the whale transaction metric, which tracks large transfers of over $100,000, has dropped to its lowest level in nearly four years. This suggests that major holders, or “whales,” are holding onto their Bitcoin rather than cashing in, which could signal a bullish outlook in the longer term.
Another significant development is the decrease in Bitcoin’s supply on exchanges, now at its lowest level since December 2018. Gule interprets this as a potential catalyst for future price gains. “A lower supply on exchanges typically suggests reduced selling pressure, which can drive prices higher as demand remains steady or increases,” she explains.
The Market Value to Realized Value (MVRV) ratio further supports the idea that Bitcoin may be undervalued, with the current price potentially below its true value. This metric, evaluated over both 7-day and 30-day periods, indicates that Bitcoin could be primed for gains if the broader market conditions align.
However, the picture is not entirely rosy. Bitcoin recently experienced an 11% drop, closing below $57,500 last week. Gule attributes this decline to several factors, including outflows from U.S. Bitcoin ETFs, which saw $279.4 million withdrawn, and a significant Bitcoin deposit by a whale on Binance. These events have dampened investor sentiment and activity on platforms like Coinbase, raising concerns that the current recovery might be short-lived.
Moreover, cryptocurrency investment products faced a difficult week, with net outflows totalling $305 million, the bulk of which came from Bitcoin ETFs, which recorded outflows of $319 million. Gule suggests that these outflows could be linked to Bitcoin’s sensitivity to macroeconomic factors, such as interest rate movements, contributing to the recent dip below $59,000.
As September progresses, the outlook for Bitcoin remains mixed. While some metrics point towards potential gains, historical trends and recent market events present significant challenges. Institutional capital flows and the impact of ETFs will be crucial in determining whether Bitcoin can maintain a price above the key $60,000 support level. Investors are advised to stay vigilant and closely monitor developments in what has traditionally been a difficult month for the cryptocurrency market.
