High volatility ahead: Is Bitcoin facing a prolonged downtrend?

The international stock market turmoil on August 5th, during which Japan’s Nikkei index temporarily lost nearly 15 percent of its value, also took a toll on the crypto market. Bitcoin briefly dropped below the $50,000 mark, while Ether also saw a significant decline, trading at times near $2,300.”

By now, the two largest cryptocurrencies in the world have embarked on a recovery course—Bitcoin is currently priced at $60,881, and Ether at $2,675.99 (as of August 18, 2024). However, crypto investors must still brace for high volatility.

Glover: Bitcoin mirrors the highs and lowss of the stock markets

At least that’s the opinion of George Glover. The crypto expert at ‘Barron’s’ emphasizes the sharp decline in Bitcoin in August. The original cryptocurrency reflects a similar trend observed in the stock market. After the initial steep drop, a partial recovery followed, mirroring the rebound in stocks.

‘This pattern suggests that the price of Bitcoin remains closely tied to traditional assets like stocks, despite widespread belief among digital asset enthusiasts that it could serve as a hedge during market turbulence,’ Glover warns crypto holders.

Recent market fluctuations should be seen as evidence that Bitcoin’s performance is still heavily influenced by broader economic conditions.

Macroeconomic data likely to influence bitcoin

According to Glover, the future trajectory of Bitcoin remains uncertain, with upcoming macroeconomic data likely playing a crucial role in shaping its price movement. Glover specifically points to key inflation data. These figures are critical because they could signal how aggressive the Fed will be in its monetary policy, which could potentially impact investor sentiment across all asset classes, including cryptocurrencies. The upcoming interest rate decisions by the US Federal Reserve—next scheduled for September 18—are also expected to influence the future direction of the crypto market. Traders are firmly expecting the first rate cut in the US since 2020 at the upcoming meeting—the only question that remains is whether it will be a small cut (0.25 percent) or a large one (0.5 percent), which is generating plenty of discussion among market observers.

In addition, data on the state of US retail—whether from economic indicators or company reports—will also play a significant role in the crypto market, as investors grow increasingly concerned about a potential US recession. According to Glover, these economic indicators could lead to further volatility in Bitcoin prices as investors digest the implications for future market conditions.

What else could influence Bitcoin’s price

Aside from economic data, corporate earnings reports also have the potential to influence Bitcoin and the overall market sentiment. In particular, the future earnings of major retailers like Walmart could provide valuable insights into the health of consumer spending, says the crypto expert. As investors analyze these reports, they will look for signs of resilience or weakness in consumer spending, which could, in turn, affect risk appetite across various asset classes, including cryptocurrencies.

The interconnectedness of Bitcoin with traditional financial markets means that positive or negative earnings reports could impact Bitcoin’s price, further contributing to the high volatility that has characterized the recent performance of the world’s largest cryptocurrency. Glover thus refutes any theories suggesting an increasing decoupling of Bitcoin’s performance from traditional assets like corporate stocks—potentially leading to further price rollercoasters for crypto investors amid stock market turmoil.”