Bitcoin price is expected to end the third quarter with a 15% loss, but traders are getting ready for a potential pump in 2024.

Bitcoin price is expected to end the third quarter with a 15% loss, but traders are getting ready for a potential pump in 2024.

Blockchain Industry: A Comprehensive Overview

Bitcoin Logo / Source: Adobe

The third quarter of 2023 has been a challenging period for Bitcoin (BTC), with losses of around 15%. This represents the worst quarterly performance since the final quarter of 2022. As of September 25th, Bitcoin had a market capitalization of approximately $513 billion, and it was trading around the low $26,000 range, marking a 17% decrease from its summer 2023 highs.

Macro Headwinds

The decline of Bitcoin in Q3 can be attributed to several macro headwinds, including the rise in US bond yields and the strengthening of the US dollar. Speculation about the US Federal Reserve maintaining higher interest rates for a longer period of time has led to an increase in bond yields and a more robust US dollar. These factors act as headwinds for Bitcoin because higher yields on US government debt reduce the incentive to hold risk-sensitive non-yielding assets such as Bitcoin. In addition, a stronger US dollar makes USD-denominated Bitcoin more expensive for foreign investors.

The influence of broader macro conditions on Bitcoin is set to increase as institutional adoption rises. This trend is expected to accelerate in the coming quarters, especially as spot Bitcoin Exchange-Traded Funds (ETFs) gain approval. Consequently, Bitcoin’s sensitivity to changes in macroeconomic conditions is likely to become even more pronounced.

A key driver of future Bitcoin bull markets will be the shift in major central banks’ policies from rate hikes to rate cuts. This transition is expected to occur in 2024 and could significantly impact the market.

2024 Bull Market?

Another narrative that many investors anticipate will boost Bitcoin in 2024 is the halving, which is currently projected to take place in April. Halvings occur when the Bitcoin issuance rate is halved, historically serving as bullish catalysts that ultimately drive the price to new all-time highs. If the halving aligns with the start of a rate cutting cycle by the Federal Reserve and global central banks, along with other potentially bullish catalysts such as the approval of spot Bitcoin ETFs in the US and increased regulatory clarity, 2024 could mark the beginning of a major new Bitcoin bull market.

Where Next for Bitcoin (BTC)?

While 2024 holds promising prospects for Bitcoin, the short-term outlook remains choppy and indecisive. BTC options investors indicate expectations of near-term price downside, with Bitcoin 7-day and 30-day 25% delta skews in negative territory. This means investors are paying higher premiums for Bitcoin options that pay out if the price falls, compared to equivalent options that pay out if the price rises.

From a technical perspective, there are concerns about Bitcoin’s long-term pennant structure, as it is currently threatening a break below. A downward breach could lead to a drop back to $20,000. However, despite short-term uncertainties, longer-term investors may view such a drop as an opportunity to accumulate.

In conclusion, the blockchain industry continues to evolve amidst the challenges faced by Bitcoin. The influence of macroeconomic factors and central bank policies on Bitcoin’s performance cannot be overlooked. The anticipated halving in 2024, along with potential regulatory advancements and increased institutional adoption, may instigate a new BTC bull market. While the short-term outlook remains uncertain, long-term investors hold an optimistic outlook for the future of Bitcoin.