The Crypto Market’s Confidence Dips as Bitcoin ETF Approval is Delayed
You may have noticed that the crypto market is currently experiencing a dip in confidence. This has been exacerbated by the delays in the approval of spot bitcoin ETFs by the SEC. Just when there was some hope that approval could be imminent, the SEC decided to carry on as usual, causing enthusiasm to dissipate.
Crypto Market Outflows: Waiting for Bitcoin ETFs
The drop in confidence is evident in the $168 million outflow from crypto funds in the penultimate week of August. This is the largest weekly outflow since March and has drained 89% of the total assets under management in crypto funds. According to the recent 70th weekly Bitfinex Alpha report released by analysts at the crypto exchange, cryptocurrency prices have surprisingly remained stable despite this negative data. On-chain data also suggests that long-term holders of bitcoin remain bullish for the future.
Stablecoins
An indicator that crypto users are not abandoning the crypto world is the growing adoption of stablecoin payments. The market capitalization of the largest stablecoin, USDT, rose from $67 billion to almost $83 billion over the course of 2023. However, the capitalization of the second stablecoin, USDC, fell from $51 billion to $26 billion, resulting in an overall decrease in capitalization.
The End of the Crypto Winter
According to Bitfinex analysts, on-chain metrics suggest that the crypto market may be nearing its bottom. The Spent Output Profit Ratio (SOPR) index is now close to break-even, indicating more BTC in profit. This historically signifies greater confidence in the market. Additionally, HODL Waves data shows that inactivity parameters of more than three years have reached new highs, indicating a positive economic environment. US consumer spending has also reached a peak not seen in the previous six months.
The Short and Long-term Forecast: Awaits Bitcoin ETFs
In the short term, we can expect Bitcoin prices to continue lateralizing between $25,000 and $31,000. However, in the longer term, things could change as bitcoin is set to halve next spring and the Fed may start cutting interest rates. The possible approval of spot bitcoin ETFs around the same time could end the lateralization phase. But all of this is dependent on how macroeconomic conditions develop, especially in the US and China.
Hot Take
Bitfinex analysts commented on the data, stating that the growing consensus of further postponements in the US rollout of a Bitcoin spot-based ETF is fueling pessimism among investors. This could delay a bullish catalyst for the markets and potentially have a less pronounced effect on actual market prices across crypto assets.
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