Key facts: Cryptocurrency markets have underperformed stocks over the past month. The arrest of Telegram’s founder has reportedly affected market sentiment, according to Coinbase. With bitcoin (BTC) trading around $59,000, down 8% from a month ago, demand is weak as it heads into September. And this is something that has been exacerbated in the overall cryptocurrency market, which is underperforming. “Over the past week, we have seen additional pressure on cryptocurrencies,” says crypto exchange Coinbase. In a report by its institutional team, it clarifies that One of the reasons is the recovery of the value of the US dollar. (USD) against major fiat currencies. According to Coinbase, the dollar's value may have bottomed out three days ago, from which point it has recovered as shown in the chart. It warns that this movement, which indicates its increased demand, may be acting as a hindrance to the performance of the cryptocurrencies.
Dollar Value Index, a metric that measures the value of the US currency in relation to other fiat currencies in the world. Source: TradingView. The exchange also emphasizes that Market players may be concerned about a more inhospitable cryptocurrency regulatory environment. He attributes this to the arrest in France of Pavel Durov, founder of the mobile messaging app Telegram, for the lack of moderation on the platform. “This has had a negative impact on The Open Network (TON) token related (although now independent) to Telegram, but also on the asset class in general,” warns Coinbase. In fact, as BitcoinDynamic reported, the arrest has generated global criticism due to concerns about freedom of expression. Added to this situation is the excess supply of bitcoin caused by sales by the United States government and reimbursements by Mt. Gox, an exchange that went bankrupt more than 10 years ago, to creditors. Likewise, it harmed the low demand in bitcoin exchange-traded funds (ETFs). With this panorama, the price of bitcoin undid the increase it had experienced up to 65,000 dollars (USD) with Jerome Powell's statements last week. He, who is the president of the Federal Reserve (Fed), the Central Bank of the United States, suggested that interest rates will be lowered in September, a policy that motivates the markets. Given this scenario, Bitcoin and cryptocurrencies have underperformed US stocks over the past monthwhich continued to recover in the week following Powell's remarks, as seen below.
The price of Bitcoin is shown in orange and the price of the S&P 500 (SPX), an index that includes the shares of the main 500 companies, is shown in purple. Source: TradingView. Meanwhile, September is coming, a period that has historically been one of declines for the price of bitcoin. In addition, this month marks the end of the northern hemisphere summer, a season in which markets tend to fall. “The lack of narratives, and the fact that September is a seasonally difficult period for cryptocurrencies, keeps traders on the sidelines,” Coinbase summarizes.
Coinbase anticipates a better environment for the bitcoin market
For Coinbase, demand for bitcoin ETFs in the United States could revivefavoring the price of the currency, after Labor Day in the United States. He explains that this is because after this commemoration, which is on September 4, many market players return from vacation. In addition, he warns that the labor data that will be published on September 4 and 6 may have the power to move the markets and attract some liquidity. The explanation behind this is that they can alleviate or increase fears of recession depending on their results. In addition, he considers that Bitcoin supply gluts, such as Mt. Gox repayments to creditors, continue to weigh on sentiment, but these may subside. It bases this on the fact that such an exchange has delivered more than half of the expected refunds to creditors and the remaining ones could be delayed, since they chose a more complete late payment. “This should open a better technical environment (i.e. supply-demand) as we approach the end of the third quarter of 2024,” Coinbase concludes.