At the beginning of September, Bitcoin remains at around the $58,500 level. Many different factors that should move the price, yet the value remains static. In this article, we discuss the possible price path for Bitcoin.
September is typically a bad month for Bitcoin, with prices sliding during the month in most years. A host of factors such as interest rate cuts and the Bitcoin halving event have buoyed talk and interest of a bounce back, to which Bitcoin has responded by remaining in a fixed position. So what is in store for the cryptocurrency, and is it headed for breakout or breakdown?
What could a breakout look like?
In an interview with a major crypto platform, analyst Josh Gilbert noted that the next major price changes for Bitcoin and other cryptocurrencies will be on September 18th. The Federal Open Market Committee will hold a meeting on this date. It is expected that Jerome Powell, chair of the Federal Reserve, will cut interest rates.
At the start of the year, the dollar was extremely strong and moving upwards. As close as April, it was ahead of most global currencies. Fast forward to September and it has dropped against the Euro and GBP.
Crypto is considered a risk asset. When interest rates are high, people tend to avoid this type of investment. When interest rates are low, they will move to riskier prospects. Thus, Gilbert goes on to explain that the key factor will not be if there will be a cut, but how much it will be. This will be the driver, dictating how much Bitcoin rises.
Another consideration will be employment data, which could have a marked impact on how much these rates will be cut. Data on this in July was much higher than anticipated and can have two outcomes. The first is that the country falls into recession, particularly if the data remains negative. A second outcome is that the low employment rates cause the reserve to cut interest rates, driving up the value of risk assets.
Bitcoin also has a historical trend of recovering when people least expect it. In the last year alone it has recovered 127.31% of its values, continuing a general upward trend. In March, it surpassed its all-time high.
Added to that is the residual impact from the Bitcoin halving event in April. This reduces the reward given to Bitcoin miners and lowers the amount of Bitcoin available. In previous events, this has always led to a price hike, particularly around six months afterwards. That would suggest a late September or early October date for a bull run on the currency.
Evidence for a breakdown
One investor not holding out much hope is Euro Pacific Asset Manager Peter Schiff. In a post on X, he predicts a total collapse of the U.S. dollar in the coming months. He thinks the historic lows for the currency of 2020 will be breached in 2025, and this will result in an economic crash sending interest rates soaring. Of course, this will hike up consumer prices and a predictable move to less risky assets.
Others think that interest rate cuts will do very little to impact the price of cryptocurrencies and bitcoin. Arthur Hayes, co-founder of BitMEX, has explained that he believes any reduction in interest rates, no matter how big, will have very little impact.
His logic, posted in a message on X, explained that since the cuts were announced they have done very little to raise the crypto price anyway. In fact, prices have waned considerably since then.
His argument lies with reverse repurchase agreements. These are a vital part of the financial system which enables short-term borrowing for government securities. They are sold with the promise they will be repurchased at a higher price on a future date. He states that the fact they are now paying 5.3% interest is currently drawing people away, as they even pay more in interest than Treasury bills. Money is going from bills to RRP agreements, with very little left for crypto assets.
These RRP agreements are also strangling liquidity in the market. Usually used as a method of short-term holding, big financial institutions are now using them as medium-term solutions, with less money flowing into the markets.
Of course, the global economy is not the US alone, though it plays a big part. In Europe, things look slightly better. The European Central Bank and the Bank of England have been cutting interest rates and continue to do so.
Outlook
The outlook is that people are in a hold-and-wait mentality. European economies look strong, with some questions about Asia after Japan launched interest rate hikes. However, all eyes are on the US and it seems it will be the Federal Reserve that decides the short-term future of cryptocurrencies.