It looks like we may be heading toward a bearish finish as September draws to a close in the crypto markets.
Bitcoin remains stuck below $20,000 with no clear momentum emerging. This reflects my thinking over the past few months: the only thing that truly matters right now is the macro situation.
With the war in Ukraine still raging, energy prices squeezing households and businesses, and disaster-related costs showing no sign of easing, Bitcoin has become one component influenced by much larger forces. Bitcoin is following the stock market, which reacts to Jerome Powell’s words, as the Federal Reserve continues its campaign to tackle persistent inflation.
I put the chart above together to show how relatively tame this month has been by Bitcoin standards: the orange coin feels trapped in a trading range. The big spike early in the month can be attributed to market thinking around inflation, and the subsequent decline followed the same theme.
The Federal Reserve is still moving markets
Of course, the catalyst has been another FOMC meeting where the Fed’s latest thinking on inflation was revealed to markets. As interest rates continue to be raised in what now looks like a determined Fed stance to prioritize fighting inflation, liquidity keeps draining from risk assets.
That pressure affects stocks, but it affects crypto even more significantly given its position further along the risk spectrum. This is why almost every digital asset has shown tighter correlation in recent months than usual.
Even Ethereum’s Merge event wasn’t enough to break the pattern: Ethereum barely moved and largely tracked other markets.
What’s ahead?
For me, this is still a time for monitoring. The macro situation remains too unpredictable. I suspect a harsh winter is coming, particularly in Europe, which still lags the US in terms of rate hikes.
This week we watched the UK announce tax cuts that sent the pound to historic lows, reflecting fears over its weakness amid persistent inflation and a very strong dollar (which earlier this year reached parity with the euro and is approaching similar levels against the pound).
The unwelcome reality is that no matter what happens within crypto, nothing is likely to rally until the macro picture resolves itself. After a historic bullish run that stretched more than a decade, we must accept the consequences.
Good times don’t last forever. In crypto we know that better than most. The big difference between this cycle and the last is that this time crypto is moving in a bearish market alongside a broader economic downturn.
That’s a big and unsettling shift.
For now, we wait to see the next CPI reading and the Fed’s reaction—until then, Bitcoin will likely continue to drift quietly.