Top Reasons Why Bitcoin (BTC USD) Bulls Retreated In The Last 7 Days

Bitcoin (BTC USD) price traded as low as $112,580 in the last 24 hours, which meant it gave up all the gains achieved in the first half of August.

This was a surprising turn of events, considering it had previously reached a new all-time high of above $124,500 on Thursday of last week.

Bitcoin price tanked by almost 10% from its recent ATH at press time. But perhaps even more interesting were the numerous factors that contributed to its decline.

Investors have been banking heavily on the prospects of rate cuts, which would favor risk-on assets such as BTC.

The probability of a rate cut in September rose a week ago, but remained subject to the economic data released this week. The inflation situation also remained sticky, which dampened the prospects of a rate cut.

Previous reports revealed that the job market data was previously overstated in 2024. While the legitimacy of jobs data was in question, the latest report disclosed that the unemployment rate was 4.7% which was the highest in the last four years.

Bitcoin (BTC USD) would normally not be as sensitive to such data. However, the cryptocurrency just achieved a new historic high, often followed by sizable sell pressure.

The market was sensitive to market-moving data. Interestingly, the fear and greed sentiment dipped into fear territory for the first time since June.

Heavily Speculative Conditions and High Leverage Made Bitcoin (BTC USD) More Volatile

If you kept up with market data in the last two weeks, chances are that you noticed rising open interest and funding rates. This was the situation for Bitcoin and a few other top cryptocurrencies.

Rising open interest highlighted a growing appetite for leveraged positions. Liquidations were on the rise in the last two weeks and may have contributed to Bitcoin’s volatile price movements.

Unsurprisingly, leveraged long positions suffered heavy blows this week. Especially in the last two days, during which leveraged long liquidations collectively amounted to over $228 million.

This outcome occurred after the price capitulated in favor of more downside since Sunday. This pullback also took place at a time when bullish expectations remained high.

ETFs Contributed to Sell Pressure

BTC ETFs previously contributed to the bullish sentiment that prevailed in the first half. However, even the ETFs changed tune this week and shifted in favor of distribution.

BTC ETF recorded $523.3 million in outflows on Tuesday. This was the second-highest spot outflows observed so far this month after the spike in outflows on 1 August.

The sell pressure from institutions may have contributed further to sentiment deterioration into fear territory. 

Bitcoin (BTC USD) price appeared to have found short-term support near the $112,500 price level. However, there was a risk of more downside if another liquidity sweep occurs near this support.

The probability of such an outcome was quite high, considering the weekly events scheduled to take place this week. This includes the S&P Global manufacturing PMI, scheduled for Thursday.

The markets have been particularly keen on Jerome Powell’s speech at the once a year Jackson Hole symposium. Powell’s speech could determine the market’s mood for the next 2 to 3 months.

In other words, this week’s economic data still has a heavy hand in the latest sentiment shift in the market.

It was a sign that investors were adopting a cautious stand ahead of economic data that could lead to a market shift.

While this underscored the potential for more downside for Bitcoin(BTC USD), investors will be on the lookout for potential accumulation events.

Recent market dips were accompanied by healthy buying at discounted prices and rapid recovery.