Bitcoin faces price correction amid economic uncertainty

In the early hours of September 30, Bitcoin (BTC) price fell 4.1% to retest the $63,500 support level, erasing the gains of the previous five days. The cryptocurrency struggled to maintain its position above $66,000, resulting in the liquidation of less than $40 million in leveraged long futures. This shows that bulls are ready to take action, although the factors that led to the decline are still everywhere.

The impact of the US economic outlook on Bitcoin

U.S. stock futures fell 0.20% as investors awaited comments from Federal Reserve Chairman Jerome Powell on the economic outlook. Growing concerns about service and manufacturing activity coupled with the upcoming September jobs report, which is due on October 4. According to Yahoo Finance, Bank of America U.S. economist Aditya Bhave noted that “the labor market is the biggest risk to our outlook.” Given Bitcoin’s short-term correlation with the stock market, any slowdown in the S&P 500 could have a negative impact on BTC prices.

The AI ​​landscape and potential market response

Concerns about a potential bubble in the artificial intelligence (AI) sector also weighed on sentiment. Some analysts believe the AI ​​market panic could lead investors to seek safer assets such as short-term government bonds and cash. Mike Fishbein, author of the (AI Marketing Brief) newsletter, believes the problem is not the technology itself, but how it is currently being used, relying primarily on platforms such as ChatGPT (OpenAI), Gemini (Google), Copilot (Microsoft), and Grok (X). Fishbein believes the cost of using large language models (LLMs) has dropped dramatically, while subscription fees remain high, a discrepancy that could ultimately reduce revenue potential and make it difficult to maintain expensive AI hardware.

Tensions in Europe and the Middle East send signs of weak economic growth

Growing concerns about the health of the global economy also drove Bitcoin's price action. In Europe, economic conditions are worsening, with automaker Stellantis cutting its profit forecast for the year, sending its shares on the Dutch exchange down 14%. Similarly, Volkswagen's cost-cutting measures include the potential closure of factories in Germany, an unheard-of move in the company's 87-year history. Germany's largest economy is expected to experience 0% or negative growth in 2024, exacerbated by gas supply disruptions in Ukraine and weak demand in China. The Bank of England forecast economic growth of just 0.3% in the third quarter, and rising house prices in the UK suggest possible stagflation.

Geopolitical tensions in the Middle East and their economic impact

The escalating conflict in the Middle East, especially the recent attacks in Lebanon, is another variable in this complex equation. According to CNBC, Israeli Prime Minister Benjamin Netanyahu said that the current measures are "not enough." A sharp rise in oil prices could push up inflation, limiting the Fed's ability to lower interest rates. These geopolitical tensions have exacerbated an already tense economic environment, affecting Bitcoin's market performance.

in conclusion

Bitcoin's recent failure to maintain its bullish momentum can be largely attributed to a range of factors, including a slowing economy, geopolitical conflicts, and investor concerns about central banks' ability to cut interest rates. While these conditions may be bullish for Bitcoin in the long term, the current environment is fraught with uncertainty, forcing traders to turn to safer investment avenues. As the Bitcoin price struggles to cope with these multifaceted challenges, the coming months will be a critical period in determining its market direction.