Bitcoin [BTC] has been experiencing volatile price fluctuations, dropping by 2.3% to reach $58,740 at the current moment. This decline has shifted market sentiment from a “neutral” stance to “fear.”
The recent price surge of BTC above $60,000 temporarily boosted market confidence when the short-term holder Spent Output Profit Ratio (SPOR) surpassed 1, as per CryptoQuant.
However, this confidence was short-lived as the ratio quickly retreated close to the breakeven point, indicating diminishing profit margins and a potential increase in selling pressure.
With profit-taking behavior and fear dominating the Bitcoin market, the question remains: will prices continue to drop or stabilize?
Heightened Downside Risk
According to a recent report by 10x Research, Bitcoin needs to break above a descending trendline to mitigate the elevated downside risk.
This downtrend is evident on the one-day chart, with BTC encountering resistance during breakout attempts.
The lack of buying activity in the market, as reflected by the Relative Strength Index (RSI) at 50, has led to these failed breakouts and neutral sentiment.
A resurgence of buyer interest could potentially push BTC back to $60,656, signaling a strong bullish trend, as highlighted by 10x Research.
However, traders are advised to monitor the 20-day Exponential Moving Average (EMA), as falling below this crucial level could trigger additional losses.
Miners Showing Signs of Capitulation
The prevailing market uncertainty has prompted Bitcoin miners to be more cautious, evident from the declining hash rate.
Data from BitInfoCharts revealed a drop in Bitcoin’s network hash rate from record levels above 700 exhashes per second earlier in the month to 665 EH/s currently.
This decline indicates that miners are scaling back their operations due to reduced profitability amid falling BTC prices.
Additionally, CryptoQuant data indicated that over the weekend, as BTC hovered around $60,000, miners transferred 7,230 BTC to exchanges, amounting to over $400 million.
These actions hint at miner capitulation, further amplifying the downside risk for Bitcoin.
Could Positive Narratives Provide Support?
The Federal Open Market Committee (FOMC) is anticipated to announce adjustments in interest rates later this week.
A potential rate cut is expected to bolster risk assets’ performance, including Bitcoin.
However, given the existing market expectations regarding the Fed’s stance, any price impact post-announcement might be minimal, with the event potentially being already factored in.
Moreover, 59% of investors are predicting a larger 50 basis points rate cut, according to the CME FedWatch Tool.
A substantial cut could raise concerns about the U.S. economy’s strength, possibly leading investors to shift from risk assets to safer havens like gold.