A massive sell-off gripped financial markets on Tuesday and is continuing into Wednesday. Major stock indices are in the red as a result of renewed fears of a recession in the United States. All of this was the cause of the sharp decline also experienced by the price of Bitcoin and the rest of the altcoins.
On Tuesday, the Supply Management Institute (SMI) published its manufacturing PMI data for August. Although these showed a slight improvement (47.2), they were barely above the July figures, which were 46.8. In this month, factory activity hit an eight-month low.
📢 Though the #US manufacturing #PMI showed a slight uptick in August, the economic gloom persists as the new orders and production continued to fall! 💡More analysis from #TrendForce and find out the sectors with stronger demand: https://t.co/cvS5H7jVxP 🔗
— TrendForce (@trendforce) September 4, 2024
Bitcoin’s pullback could be prolonged
The poor numbers in July were largely responsible for the market crash in early August. Now they are once again being blamed for the decline in most equity markets. The fact that manufacturing activity has remained below 50 for two months in a row is a strong cause for fear for investors.
On the other hand, it is worth noting that this Friday we will also see the release of highly relevant data such as non-agricultural payrolls in the US. Likewise, in the EU, economic growth data will be published. As can be seen, this is a tense environment that could significantly affect the performance of stock market assets and cryptocurrencies.
As a result of this reality that caused the indices to fall, the Japanese stock market also showed poor performance. Taken together, all these factors present themselves as a perfect storm for the continuation of Bitcoin’s strong decline.
On Wednesday, the Nikkei closed in the red by over -4.2%, which is the third major global drop this year. In sum, the price of BTC hit a low of $55,500 in the early hours of this same day. At the time of writing this note, the queen Cryptocurrency changes hands at $56,500, according to CoinMarketCap.
Japan’s benchmark Nikkei Stock Average fell to a three-week low on Wednesday, following a drop in US high-tech stocks and a rise in the yen. https://t.co/5Iur9R5aGQ
— Nikkei Asia (@NikkeiAsia) September 4, 2024
September is once again doing its thing in the markets
The passive factory activity in the United States became the main factor in the fall of the markets since Tuesday. With this, whether fortuitous or not, the trend of September as a month of poor performance for stocks and cryptocurrencies is fulfilled.
Thus, psychological factors of historical behavior are added to the economic behavior of the North American country. This creates a difficult environment that forces capital to stay away from risky assets and seek defensive assets.
It is important to note that this negative performance of the markets could continue for several weeks. Likewise, it could also come to a screeching halt this Friday with the non-agricultural payrolls data. This last possibility is latent, considering that the employment sector has shown more positive numbers since August.
In any case, Friday will reveal whether the economy is really headed for a recession. Both manufacturing and nonfarm payrolls data will have a huge influence on the Fed’s monetary policy decision on September 18.
Bitcoin price experiences the biggest drop since early August. Source: CoinMarketCap
Technical status of BTC
Bitcoin’s price has been trading in a limited range since August 12. Thus, its recent drop below $56,000 leads analysts to predict a possible acceleration in the sale.
Thus, if the support in the $54,000 area does not hold, a massive sell-off could be closer than feared. Currently, BTC is below the 50-day and 200-day simple moving averages. These factors point towards a strong bearish momentum.
In parallel, the Relative Strength Index (RSI) is approaching the oversold zone, suggesting that the cryptocurrency might be undervalued, which could attract buyers at lower levels. Overall, Bitcoin’s sharp pullback should be expected to show its full dimensions in the coming hours.
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