Bitcoin is back, just above June lows

Bitcoin is consolidating after its sharp drop from a few weeks’ ago when it crashed below the 200-day simple moving average at $27,443.

Prices of the world’s most popular cryptocurrency traded under this widely watched indicator for most of last year before then advancing and staying above it for most of 2023 until very recently.

As the calendar shifts to September, most seasoned professionals will need no reminders that there is a negative effect on risk appetite during the ninth month of the year.

The benchmark S&P 500 major US stock index has an average monthly return of -1% during September going back to 1928. We recently highlighted the average 6% monthly decline during the same time that has hit Bitcoin since its inception in 2010.

The recent, sudden selling seriously shook Bitcoin out of its summer lull. Fears around Elon Musk’s SpaceX writing down some of the value of its cryptocurrency holdings spooked the market.

Low trading volumes and a drop in volatility probably exacerbated the momentum as the market was more sensitive to larger trades.

This was illustrated by the fact that the August 17 move would have taken the sale of 463 bitcoins to push the price down by 1% of its prevailing value, according to CCData, an industry information provider.

Certainly, trading activity and liquidity have dried up in the wider crypto markets this year as US regulators have cracked down on and charged some of the biggest names in the industry including Coinbase and Binance.

This has contrasted with more positive news around BlackRock’s SEC application for a Bitcoin ETF.

In the short-term, investors are also having to adjust their expectations around US interest rates staying higher for longer as the economy remains much more resilient than most expected, causing upward revisions to growth forecasts.

The Fed raised rates to 22-year highs in July and Chair Powell left the door open to further increases this year if that data warrants it in his Jackson Hole speech last week.

Buyers will hope the mid-June low at $24,750 can act as support with the February top at $25,288 just above here as an initial reference point. The 200-day simple moving average could cap any upside with the breakdown level around the 100-day simple moving average at $28,450.