Bitcoin (BTC) price is reflecting the giving up of some recent gains, mainly because traders are more focused on how the US economy will fare following the US Federal Reserve’s decision on interest rates this week.
Macroeconomic factors push Bitcoin price down
As of September 16, the BTC price has dropped 1.80% to around $58,125, continuing its decline from the local high of $60,670 set four days earlier.
However, the appearance of a long bearish candlestick on the latest daily chart shows bullish rejection, indicating that the recent decline may have been due to short-term traders taking profits ahead of the Federal Open Market Committee (FOMC) meeting on September 18-19.
Fed officials are expected to cut the benchmark interest rate by at least a quarter of a percentage point when they conclude their two-day meeting on Wednesday. This is due to recent US Consumer Price Index (CPI) data, which showed inflation appears to be under control and signs of weakness in the labor market.
Lower interest rates are good for risk assets like Bitcoin. However, crypto traders are cautious ahead of the Fed’s decision, with the Bank of Japan preparing to raise interest rates at its meeting on September 20, just a day after the Fed’s decision.
This caution relates to the “yen carry trade” and its potential impact on Bitcoin. This trading strategy involves borrowing yen at low interest rates to invest in higher-yielding assets. If the Bank of Japan raises interest rates, the cost of borrowing yen will increase, potentially leading to the trade being canceled.
This could lead to selling pressure on risk assets like Bitcoin, similar to what happened in early August.
Therefore, while a rate cut from the Fed could be beneficial for Bitcoin, the uncertainty surrounding the Bank of Japan’s decision introduces a layer of risk, keeping traders cautious until both central bank meetings conclude.
Selling Pressure from Bitcoin Exchanges and Miners
Bitcoin's drop today was accompanied by an increase in BTC balances across all exchanges, according to data from Glassnode.
As of September 16, the total number of BTC held by exchanges was over 3.019 million, compared to around 3 million on August 29. This increase suggests that traders are moving more BTC onto exchanges, which could increase selling pressure.
Signs of trouble may continue to emerge from the Bitcoin mining community, especially as the rate of BTC accumulation slows — as shown on the chart below — after recording its lowest revenue in nearly a year in September.
As miners' revenue declines, they may need to sell more mined Bitcoins to cover expenses, such as electricity and equipment costs.
BTC Price Technical Adjustment
From a technical perspective, today's Bitcoin price drop is a continuation of the ongoing correction trend. This began after BTC tested the upper resistance of the current descending triangle range as resistance, similar to previous corrections after testing similar levels.
Therefore, the BTC price target for September appears around the lower resistance of the descending triangle channel, which is in line with the $52,500 – $53,000 zone.
Conversely, a return above the 50-day (red line) and 200-day (blue line) exponential moving averages could invalidate the bearish setup.
Instead, the price will likely break above the upper resistance of the triangle to resume a rally towards $65,000, which has been a resistance level since August.
