As the initial excitement among investors regarding Bitcoin wanes, the BTC price faces a renewed challenge due to the re-emergence of regulatory and macroeconomic pressures. These factors have a negative impact on the cryptocurrency’s value.
Numerous data indicators suggest that the Bitcoin price is poised to dip below $29,000 in the near future, and yes, you read that correctly.
Let’s delve into the primary factors contributing to the current downtrend in the value of Bitcoin.
On July 13, Bitcoin faced obstacles in surpassing the $31,800 mark, leading to a 6.3% correction that brought it down to $29,700 on July 17. This price movement possibly mirrors investors’ apprehensions about the potential impact of ongoing regulatory developments and macroeconomic challenges. Such concerns could potentially drive Bitcoin’s value below the $29,000 level, which was last witnessed on June 21.
In the realm of derivatives, there is a noticeable surge in demand for Bitcoin futures. However, it’s essential to note that Asian markets are currently experiencing a slowdown in their activity.
Normally, Bitcoin quarterly futures tend to trade at a minor premium compared to the spot markets. This premium reflects the sellers’ readiness to receive a higher amount of money in exchange for postponing the settlement. In robust and healthy markets, BTC futures contracts commonly trade with an annualized premium ranging from 5% to 10%, a phenomenon referred to as “contango.”
It’s worth noting that Contango is not exclusive to the cryptocurrency markets; it occurs in various financial sectors as well.
From July 14 to July 17, BTC futures sustained a neutral-to-bullish 7% premium, exceeding the 5% threshold. This indicates a moderate level of confidence among the bullish traders, especially after the unsuccessful endeavor to surpass the $31,800 mark.
Nonetheless, the Tether premium in Asia has been on a decline recently. This premium acts as a significant indicator of demand among retail crypto traders in China, and it is determined by measuring the difference between peer-to-peer trades and the U.S. dollar value.
Recently, the Tether premium in Asia experienced a noteworthy decline, reaching a discount of 1.8%, which represents its lowest point in more than six months. This trend of an inverse premium commenced on July 12 and has since been widening, signifying a moderate level of sell pressure in the market.
Regulatory Concerns Continue Impacting Crypto
Investors continue to remain concerned about the regulation of the cryptocurrency sector. Although the July 13 ruling, which stated that the sale of XRP through exchanges and over-the-counter desks did not breach securities regulations, had a positive impact on the markets, it did not provide a definitive classification for XRP’s initial coin offering as a security offering.
This lack of clarity has left some investors feeling uneasy, as it raises the prospect of other cryptos also facing potential securities designations in the future.
Apart from the court’s ruling on XRP, Binance made headlines with the announcement of laying off 1,000 employees. Despite the exchange refuting the reports and stating that it is part of routine resource reallocation and continuous hiring, concerns have arisen about Binance’s future. The departure of several key executives and the ongoing court action from the Securities and Exchange Commission have added to these apprehensions.
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Macroeconomic Activities Threaten Crypto
The macroeconomic conditions have been unfavorable for Bitcoin and risk-on assets. China’s gross domestic product (GDP) growth slowed to 6.3% in the second quarter, which was below market expectations. Several factors, including the ongoing trade war with the United States and the government’s measures to address debt issues, have contributed to this economic slowdown.
Given the external factors and pending court decisions that could potentially have adverse effects on the two largest exchanges, the likelihood of Bitcoin breaking below $29,000 has risen. This situation sets up a favorable scenario for bears, leading to increased strength in the $30,000 resistance level.
Bitcoin Might Dive Below $29,000 In The Coming Days
Currently, there seems to be no particular catalyst limiting Bitcoin’s upside potential, except for the concern over deteriorating macroeconomic conditions and the indications of potential interest rate hikes by the Federal Reserve in 2023. These factors are the main contributors affecting the cryptocurrency’s performance in the market.
Regarding trading, BTC futures demonstrate greater confidence among professional traders who utilize leverage. However, the overall upside for cryptocurrencies is restricted due to the selling pressure from retail investors in Asia.
Source: https://econintersect.com/bitcoin-stumbles-as-macro-and-regulatory-concerns-arise,-what-next