Bitcoin on Track for Worst Quarterly Performance Since Q4 2022
Bitcoin (BTC) is expected to finish the third quarter of 2023 with losses of approximately 15%. This marks its worst quarterly performance since the final quarter of 2022, when it also experienced a 15% loss. The current market capitalization of the world’s largest cryptocurrency is around $513 billion as of September 25th, with BTC trading in the low $26,000s. This is about 17% lower than its summer highs in the upper $31,000s.
Macro Headwinds Impacting Bitcoin
In Q3, BTC has faced challenges due to a rise in US bond yields and the strength of the US dollar. These factors are influenced by expectations that the US Federal Reserve will maintain higher interest rates for a longer period. Surprisingly positive US economic data throughout the quarter has led traders to reduce their bets on a US recession. The Fed recently announced that it may raise rates again this year and projected fewer rate cuts in 2024 compared to previous projections.
The impact of rising bond yields and a stronger US dollar on Bitcoin is significant. Higher yields on US government debt reduce the appeal of holding risk-sensitive assets like Bitcoin. Additionally, a stronger dollar makes USD-denominated Bitcoin more expensive for foreign investors. As institutional adoption continues to grow and spot Bitcoin ETFs gain approval, Bitcoin’s sensitivity to broader macro conditions will likely increase. Future BTC bull markets may be driven by shifts in central bank policies towards rate cuts rather than rate hikes, but this narrative may not take hold until 2024.
Potential Bull Market in 2024
Investors are anticipating several factors that could boost BTC in 2024, including the halving event expected to occur in April. Halvings, which decrease the Bitcoin issuance rate by half, have historically been bullish catalysts leading to Bitcoin’s rise to all-time highs. If the halving aligns with the beginning of a rate-cutting cycle by major central banks and other positive catalysts such as spot Bitcoin ETF approvals in the US and regulatory clarity from Congress or ongoing SEC/crypto firm lawsuits, 2024 could mark the start of a significant new BTC bull market.
Bitcoin’s Near-Term Outlook
While 2024 holds promise for Bitcoin, the short-term outlook remains uncertain and volatile. BTC options investors are anticipating downside price movements in the near term, as reflected by negative delta skews for Bitcoin 7 and 30-day options. Technical analysis also raises concerns, with Bitcoin threatening to break below a long-term pennant structure that could result in a drop to $20,000. Long-term investors may view this as an opportunity to accumulate, but conditions are likely to remain challenging in the near term.
Hot Take: A Challenging Quarter for Bitcoin with Optimism for 2024
Bitcoin is on track to end Q3 2023 with its worst quarterly performance since Q4 2022. The rise in US bond yields and a stronger US dollar have posed challenges for Bitcoin during this period. However, there is optimism for a potential bull market in 2024 driven by factors such as the halving event and regulatory developments. In the near term, BTC faces uncertainties and technical concerns that could lead to further downside. Despite these challenges, many investors see a drop in price as an opportunity to accumulate BTC in preparation for a potentially promising future.
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