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Keywords: bitcoin price drop, buy bitcoin, BTC price, institutional stablecoin pause, crypto market trends, bitcoin market, stablecoin transactions, market volatility, bitcoin investment, financial institutions, blockchain technology.
Introduction
Since the 2024 halving event bitcoin has not performed consistently as its price has been falling and rising from time to time. This may explain why the entire crypto market is down. This could also be the reason for the prevailing negative market sentiment. This analysis looks at the bitcoin behaviour since the start of August. We shall also discuss the impact of institutional investment on bitcoin price movement.
Bitcoin Drops below $59,000 amid the Depressed Crypto Market
During the first weekend of August bitcoin witnessed a strong move which forced its price to fall below $60,000, one of the perennial support and resistance levels. Usually, once the bitcoin price falls below $60,000 it may plunge further down towards the $54,000 psychological level. On the other hand, if it shoots above $60,000 it may rise towards $70,000.
However, by the 12th of August the BTC price was fluctuating around $58,456.21, after falling by about 4.61% within the previous 24 hours. Notably, almost the entire crypto market experienced the same price shock. The main cause of the bitcoin price drop was the reduction in institutional stablecoin inflows. That drop indicated that large-scale bitcoin investors had paused buying bitcoin.
Pertaining to this Lookonchain, an onchain analytics platform, commented: “Institutions seem to have temporarily stopped buying, and the price of $BTC dropped 4.5% today! We noticed that institutions stopped receiving $USDT from Tether Treasury and transferring it to exchanges 2 days ago.” The drop in institutional bitcoin investment led to a fall in the demand for the cryptocurrency.
Another factor that may look far-fetched that might have caused the slump of the bitcoin and ETH prices was the increasing chance of Kamala Harris to win the US presidential elections.
Some analysts believe that the events of 5 August might indicate a bitcoin market bottom after institutional stablecoin pause. The other sign of the possible bottom is Tether’s minting of $1.3 billion USDT. In fact, bitcoin dropped below the 5 month bottom of “above $49,500.” The newly minted stablecoins were channelled to several crypto exchanges that include Coinbase, OKX Kraken and Bullish.
The other factor that might have led to the low buying activity in the bitcoin market could be the fear of a recession. Some changes in macroeconomic fundamentals of leading economies such as the United States have hinted on a possibility of an economic meltdown. Despite the recent BTC price fall, generally, the asset is within a bullish flag pattern that started forming in March. The resistance of that flag is at around $68,000. The existing crypto market trends indicate that if many institutional and retail investors buy bitcoin in large amounts its price may break above the bullish flag pattern and shoot towards $100,000. However, the increase in bitcoin investment is often accompanied by a rise in stablecoin transactions.
Apart from what we discussed above there are other scenarios. The bitcoin price may fall further to reach the $55,000 demand zone before it rises again towards $68,000.
The Puzzle to be solved: Why Institutions Paused Acquiring Stablecoins?
There are a number of reasons for institutional stablecoin pause. One of the causes of the pause is regulatory uncertainty pertaining to stablecoins. Several countries including the United States are in the process of crafting crypto legislation whose effects on stablecoins are not yet known. For instance, the European Union recently introduced MiCA that governs the functions of stablecoins in the region.
The introduction of various central bank digital currencies (CBDCs may pose a threat to stablecoins as some financial institutions may opt to invest in CBDCs rather than stablecoins. Therefore, some financial institutions may need time to compare stablecoins against CBDCs.
Some financial institutions might have paused to acquire stablecoins due to the fear of market volatility, especially in the wake of the coming U.S presidential elections. This is because sudden change of leadership in the United States may lead to financial instability. In the past such instability led to the depegging of a number of stablecoins that include USDT and USDC.
Bitcoin market Analysis: Implications of BTC Slump Below $60,000
At the time of writing bitcoin is exchanging hands at $59,342 after gaining by 2.7% within the last 24 hours. Its daily chart shows that it is fluctuating in a tight range between $58,700 and $59,430 as the following graph shows Bitcoin Chart as on 17 August - CoinGecko
As observed on the graph the asset price is moving sideways, showing very low market volatility. The most likely trigger for another strong uptrend could be capital injection into BTC ETFs from financial institutions that believe in the transformative nature of blockchain technology. Also, looking at the current price action there is a 50-50 chance that the BTC price may rise or fall.
Institutional Strategies towards Stablecoins
Stablecoins are likely to flow into financial institutions once some possible hindrances that include economic uncertainty, especially the fear of recession are resolved. Once stablecoin transactions resume the bitcoin price may surge above the $60,000 psychological resistance level.
Recent BTC price surge to $56k analysis.
However, for bitcoin to pick up much price momentum it should first reach the $60,600 price level. In an X post Rekt Capital, a popular analyst said, “Bitcoin is doing all the right things to confirm $60,600 as support so as to position the price for a revisit of $65,000+ over time.” However, it is also essential to note that capital inflow into the United States listed spot bitcoin ETFs may give bitcoin the push it requires to surge towards $100,000.
Conclusion
In the first week of August the bitcoin price fell below $60,000. Since that moment to the time of writing its price had been fluctuating between $58,700 and $59,430. Based on the current price, bitcoin can either breakdown or breakout. The resumption of capital inflow into the U.S listed BTC ETFs may help to reignite its uptrend.