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In August, the cryptocurrency market experienced a dramatic shift in momentum. Bitcoin, the flagship cryptocurrency, faced a significant setback as its price plunged below the $25,000 mark. This drop marked its lowest level since mid-June, highlighting the persistent volatility that has gripped crypto markets.
Bitcoin's Price Plunge: From $31,500 to Below $25,000
Bitcoin had shown resilience earlier in the year, staging a notable turnaround from its 2022 lows and trading above $31,500 in early July. However, late July marked a turning point, and August proved to be a challenging month for Bitcoin, with its value plummeting by nearly 10%.
Market Volatility Ahead of the Federal Reserve's September Meeting
As September began, Bitcoin continued to face a rocky path, struggling to surpass the psychological level of $26,000. The looming Federal Reserve meeting further intensified market uncertainty, leaving investors and analysts eager to understand what lies ahead for Bitcoin in September.
September's Uncertain Start: Bitcoin's Rocky Road
The beginning of September has been marked by ongoing turbulence in the cryptocurrency market. Bitcoin's price has been notably volatile, with fluctuations making it challenging to regain its footing and surpass the psychological barrier of $26,000. At the time of writing, the currency is trading at around $25,730-level.
Bitcoin's Historical Correlation with Nasdaq 100
Historically, Bitcoin's performance has exhibited a close correlation with that of the tech-heavy Nasdaq 100 stock index. This connection arises from the perception of both tech stocks and cryptocurrencies as risky assets. Consequently, investors often respond to market conditions in a similar manner when determining their investment strategies.
Positive Factors Amidst Recent Lows
Despite the recent lows, there are several encouraging signs for those who maintain faith in Bitcoin's potential. One of the most significant developments of 2023 for the Bitcoin ecosystem was the legal victory in the U.S. Court of Appeals for the D.C. Circuit, involving Grayscale and the U.S. Securities and Exchange Commission (SEC) in late August (read: 5 Favorable Events Bitcoin Had in 2023: ETFs in Focus).
The court sided with Grayscale in its lawsuit against the SEC's denial of the company's application to convert the Grayscale Bitcoin Trust into an ETF. In past few weeks, we have seen the filing of spot ETF applications by renowned asset managers like Blackrock, WisdomTree and Invesco.
Impact of Long-Term Treasury Yields on Bitcoin
August saw benchmark U.S. Treasury yields hit a high of 4.34%. However, it subsequently receded to 4.30% as of Sep 6. These fluctuations are closely tied to the Federal Reserve's series of interest rate hikes, which have contributed to a sharp decline in inflation over the past year. Nevertheless, inflation remains considerably higher than the Fed's target of 2%, prompting speculation about further rate hikes and putting pressure on bond yields.
Fed's Labor Market Data: A Glimpse of Hope
Recent economic data releases have indicated a cooling labor market, raising hopes that the Federal Reserve may decide to maintain interest rates at their current levels during its September meeting. The CME FedWatch Tool reflects this sentiment, with approximately 93% of market participants (up from 85% one-month ago) confident that the Fed will pause its interest rate hikes in September.
Cryptocurrency's Bright Outlook
The prospect of the Fed maintaining interest rates at their current levels bodes well for high-risk assets, including cryptocurrencies. Additionally, the growing interest in cryptocurrencies among financial giants is expected to exert upward pressure on the prices of Bitcoin and other digital currencies in the near future. This burgeoning interest underscores the potential for cryptocurrencies to play a more significant role in the global financial landscape.
Against this backdrop, following are the regular ETFs on this concept that may win in the near term.
ETFs in Focus
VanEck Digital Transformation ETF (DAPP - Free Report) – Up 130.0% YTD
Bitwise Crypto Industry Innovators ETF (BITQ - Free Report) – Up 115.3% YTD
Global X Blockchain ETF (BKCH - Free Report) – Up 105.7% YTD
iShares Blockchain and Tech ETF (IBLC - Free Report) – Up 85% YTD
Global X Blockchain & Bitcoin Strategy ETF (BITS - Free Report) – Up 78.8%
Fidelity Crypto Industry and Digital Payments ETF (FDIG - Free Report) – Up 72.7% YTD
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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Can Crypto ETFs Make a Comeback in September?
In August, the cryptocurrency market experienced a dramatic shift in momentum. Bitcoin, the flagship cryptocurrency, faced a significant setback as its price plunged below the $25,000 mark. This drop marked its lowest level since mid-June, highlighting the persistent volatility that has gripped crypto markets.
Bitcoin's Price Plunge: From $31,500 to Below $25,000
Bitcoin had shown resilience earlier in the year, staging a notable turnaround from its 2022 lows and trading above $31,500 in early July. However, late July marked a turning point, and August proved to be a challenging month for Bitcoin, with its value plummeting by nearly 10%.
Market Volatility Ahead of the Federal Reserve's September Meeting
As September began, Bitcoin continued to face a rocky path, struggling to surpass the psychological level of $26,000. The looming Federal Reserve meeting further intensified market uncertainty, leaving investors and analysts eager to understand what lies ahead for Bitcoin in September.
September's Uncertain Start: Bitcoin's Rocky Road
The beginning of September has been marked by ongoing turbulence in the cryptocurrency market. Bitcoin's price has been notably volatile, with fluctuations making it challenging to regain its footing and surpass the psychological barrier of $26,000. At the time of writing, the currency is trading at around $25,730-level.
Bitcoin's Historical Correlation with Nasdaq 100
Historically, Bitcoin's performance has exhibited a close correlation with that of the tech-heavy Nasdaq 100 stock index. This connection arises from the perception of both tech stocks and cryptocurrencies as risky assets. Consequently, investors often respond to market conditions in a similar manner when determining their investment strategies.
Positive Factors Amidst Recent Lows
Despite the recent lows, there are several encouraging signs for those who maintain faith in Bitcoin's potential. One of the most significant developments of 2023 for the Bitcoin ecosystem was the legal victory in the U.S. Court of Appeals for the D.C. Circuit, involving Grayscale and the U.S. Securities and Exchange Commission (SEC) in late August (read: 5 Favorable Events Bitcoin Had in 2023: ETFs in Focus).
The court sided with Grayscale in its lawsuit against the SEC's denial of the company's application to convert the Grayscale Bitcoin Trust into an ETF. In past few weeks, we have seen the filing of spot ETF applications by renowned asset managers like Blackrock, WisdomTree and Invesco.
Impact of Long-Term Treasury Yields on Bitcoin
August saw benchmark U.S. Treasury yields hit a high of 4.34%. However, it subsequently receded to 4.30% as of Sep 6. These fluctuations are closely tied to the Federal Reserve's series of interest rate hikes, which have contributed to a sharp decline in inflation over the past year. Nevertheless, inflation remains considerably higher than the Fed's target of 2%, prompting speculation about further rate hikes and putting pressure on bond yields.
Fed's Labor Market Data: A Glimpse of Hope
Recent economic data releases have indicated a cooling labor market, raising hopes that the Federal Reserve may decide to maintain interest rates at their current levels during its September meeting. The CME FedWatch Tool reflects this sentiment, with approximately 93% of market participants (up from 85% one-month ago) confident that the Fed will pause its interest rate hikes in September.
Cryptocurrency's Bright Outlook
The prospect of the Fed maintaining interest rates at their current levels bodes well for high-risk assets, including cryptocurrencies. Additionally, the growing interest in cryptocurrencies among financial giants is expected to exert upward pressure on the prices of Bitcoin and other digital currencies in the near future. This burgeoning interest underscores the potential for cryptocurrencies to play a more significant role in the global financial landscape.
Against this backdrop, following are the regular ETFs on this concept that may win in the near term.
ETFs in Focus
VanEck Digital Transformation ETF (DAPP - Free Report) – Up 130.0% YTD
Bitwise Crypto Industry Innovators ETF (BITQ - Free Report) – Up 115.3% YTD
Global X Blockchain ETF (BKCH - Free Report) – Up 105.7% YTD
iShares Blockchain and Tech ETF (IBLC - Free Report) – Up 85% YTD
Global X Blockchain & Bitcoin Strategy ETF (BITS - Free Report) – Up 78.8%
Fidelity Crypto Industry and Digital Payments ETF (FDIG - Free Report) – Up 72.7% YTD
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)