Cryptocurrencies fall further amid renewed decline in risk appetite
Today's market analysis on behalf of Samer Hasn, Senior Market Analyst at XS.com
September 4, 2024 (Investorideas.com Newswire) Bitcoin continues to decline today by 2% after falling below $56,000 in early trading, which was its lowest level in about a month. Ethereum is also approaching $2,300.
The noticeable declines in cryptocurrencies come as the US stock market resumes its sharp losses, which in turn came as concerns about the health of the US economy deepened.
Yesterday, we saw the ISM manufacturing PMI report for August, as manufacturing activity continued to contract. The report also indicated a contraction in new orders, supplier deliveries, exports, and imports. That means demand remains weak, given companies' reluctance to invest capital and inventory due to tight monetary policy and uncertainty over the presidential election, according to the report.
This led to renewed sell-offs in the stock market, with the NASDAQ 100 - a key gauge of risk appetite - ending the day down 3.15%.
This negativity surrounding crypto market has further frustrated investors. Yesterday saw the largest outflows from Bitcoin spot ETFs since May, with net outflows of more than $287 million, according to SoSo Value.
Today alone also saw the liquidation of more than $100 million worth of long Bitcoin derivatives positions, according to CoinGlass. Meanwhile, Bitcoin futures open interest continue to shrink, hitting a 20-day low of $29.13 billion today.
On the bright side, yesterday's disappointing data has strengthened the argument for a 50-basis point rate cut by the Fed at its upcoming meeting in two weeks, with the CME FedWatch Tool indicating a 41% probability of this outcome. Although a 25-basis point cut remains the most likely scenario, there is a 44% chance of a full percentage point cut by the end of the year, following the December meeting.
Increased optimism around multiple rate cuts could boost risk appetite in the markets, which is a crucial factor for the crypto market. However, in my opinion, the most important factors driving sustained gains are the broader adoption of cryptocurrency technology beyond its current speculative nature and the stability of the regulatory environment.
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