Bitcoin Faces Setback as Market Sentiment Wavers

Bitcoin (BTC) experienced a significant decline on Thursday, dropping below the $57,000 mark. This reversal followed a brief recovery on Wednesday, as lingering apprehensions about the resilience of the U.S. economy led investors to offload risk assets. The leading cryptocurrency by market capitalization fell over 2% to a price of $56,700, after struggling to maintain a foothold above $58,000 the previous day.

Since peaking above $65,000 on August 25, Bitcoin has been on a downward trajectory, marked by brief and shallow recoveries. This pattern suggests a persistent “sell-on-rise” mentality among traders, indicating a cautious approach to market movements.

In addition to Bitcoin, many other cryptocurrencies, including ether (ETH), XRP, and TON, also saw their Wednesday gains evaporate, remaining largely unchanged over a 24-hour period, as per data from CoinDesk. The CoinDesk 20 Index (CD20), which tracks the broader cryptocurrency market, was recently reported to be 0.9% higher.

The prevailing sentiment of selling on rallies likely stems from growing concerns regarding potential recession risks in the U.S. economy. According to Valentin Fournier, an analyst at the digital assets advisory firm BRN, this sentiment encourages reduced exposure to riskier assets.

• “Economic reports are increasingly suggesting that the risk of a recession should not be overlooked,” Fournier stated. “The ISM manufacturing index has fallen 0.5% below expectations, and job openings currently stand at 7.7 million, compared to the anticipated 8.1 million.”
• “Given the current economic uncertainties and the potential for diminished liquidity, we advise reducing exposure to BTC and waiting for a more favorable entry point before increasing investments,” Fournier added.

The U.S. Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) on Wednesday, revealing that the number of job openings as of the last business day of July was 7.67 million—falling short of the market expectation of 8.1 million and below the downwardly revised June figure of 7.9 million, according to FXstreet.

Furthermore, the Federal Reserve’s Beige Book, which summarizes commentary on economic conditions, presented one of the most pessimistic outlooks in years, highlighting a “slowing and slackening labor market,” as noted by Julia Pollak, chief economist at ZipRecruiter.

Earlier in the week, the ISM manufacturing PMI indicated a continued contraction in activity for August, reigniting fears of economic slowdown that had previously unsettled risk assets, including cryptocurrencies.

Despite the weak economic data fueling speculation for potential interest rate cuts by the Federal Reserve, it has yet to provide a stabilizing effect on Bitcoin’s price. Alex Kuptsikevich, a senior market analyst at FxPro, remarked that the ongoing weakness in Bitcoin could signal broader implications for traditional risk assets.

• “The weakness in cryptocurrencies might reflect a limited appetite for risk, with other markets potentially following suit,” Kuptsikevich noted, emphasizing BTC’s struggle to maintain strength despite recent dollar index weakness.
• “Bitcoin has declined for nine out of the last 11 days, as its attempts to consolidate above the 200-day moving average have led to intensified sell-offs. This trend continues into Thursday morning, with prices testing the lows of the past four months,” Kuptsikevich explained in an email to CoinDesk.