The Future of Bitcoin: What to Expect in September
The Recent Decline
The cryptocurrency rally came to a sudden halt in August. The price of Bitcoin (BTC) fell below the $25,000 mark in late August, its lowest level since mid-June, as volatility continues to grip markets ahead of the Federal Reserve’s September policy meeting.
Bitcoin staged a solid turnaround from its 2022 lows and was trading above $31,500 in early July. However, the rally stalled in late July, and August saw somewhat of a bloodbath for Bitcoin, with a nearly 10% decline.
In fact, the start to September is also rocky, holding below the psychological level of $26,000 over the past 24 hours. So, what’s in store for Bitcoin in September?
Correlation with Tech Stocks
Traditionally, the price of Bitcoin has been closely correlated with the performance of the tech-heavy Nasdaq 100 stock index. This is because both tech stocks and cryptocurrencies are viewed as risky assets, and investors often respond to market conditions in a similar manner when assessing their investment strategies.
Positive Factors for Bitcoin
Right now, there are a lot of positives for having faith in Bitcoin despite its recent lows. Last month, NVIDIA Corporation NVDA came up with robust earnings. This gave not only investors confidence to invest in tech stocks but also cryptocurrencies, including Bitcoin, a boost.
Moreover, the long-date Treasury yields hit multi-year highs in August. The 10-year Treasury yield hit its highest level since 2007 last month. However, it has since fallen to 4.23% as of Sep 5.
The Fed has so far increased interest rates by 525 basis points, taking the benchmark rate to the range of 5.25-5.5%. The measure has resulted in inflation declining sharply over the past year. However, inflation remains a lot higher than the Fed’s target of 2%. This has kept the Fed open for more interest rate hikes, which has been putting pressure on the bond yield.
However, a series of economic data released over the past week indicates that the labor market is cooling. This has raised hopes of the Fed keeping interest rates unaltered in its September meeting. The CME FedWatch Tool shows that around 95% of the market participants are now confident about the Fed pausing its interest rate hikes in September.
This definitely bodes well for high-risk assets, including cryptocurrencies. Moreover, the growing interest in cryptocurrencies among financial giants is expected to drive up the prices of Bitcoin and other digital currencies in the near future.
For instance, BlackRock, Inc. BLK has urged regulators to create a spot Bitcoin ETF, a move that could boost retail investor involvement.
Similarly, The Charles Schwab Corporation SCHW is backing a new exchange called EDX Markets, indicating a growing institutional interest in the crypto space. These developments could have a positive impact on the cryptocurrency market.
Bitcoin’s rally may have taken a pause but the future holds promise. Currently, it is advisable for investors to contemplate accumulating cryptocurrencies through a buying-on-the-dip strategy. Each decline in cryptocurrency prices may present an advantageous opportunity for acquisitions, potentially resulting in significant gains as the market’s volatility eventually settles.
Stocks to Watch
Robinhood Markets, Inc. HOOD operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds, options, gold and cryptocurrencies. HOOD buys and sells Bitcoin, Ethereum, Dogecoin and other cryptocurrencies using its Robinhood Crypto platform.
Robinhood Markets expected earnings growth rate for the current year is 57.3%. Shares of HOOD have gained 14.8% in the past three months. Robinhood Markets currently has a Zacks Rank #2 (Buy).
Coinbase Global, Inc. COIN offers financial infrastructure and technology to support the global cryptocurrency economy. COIN provides a main financial account for consumers in the crypto space, a marketplace with liquidity for institutional crypto asset transactions, and technology and services for developers to build crypto-based applications and accept cryptocurrencies securely as payment.
Coinbase Global’s expected earnings growth rate for the current year is 84.8%. Shares of COIN have increased 20.7% in the past three months. Coinbase currently has a Zacks Rank #3.
HIVE Blockchain Technologies Ltd. HIVE operates as a cryptocurrency mining firm. The company validates transactions on blockchain networks, as well as provides crypto mining and builds bridges between crypto and traditional capital markets.
HIVE Blockchain’s expected earnings growth rate for the current year is 72.3%. Shares of HIVE have gained 4.9% in the past three months. HIVE presently carries a Zacks Rank #3 (Hold).
Bitcoin’s recent decline does not diminish its potential for the future. With positive factors such as strong tech stock earnings and a cooling labor market, Bitcoin and other cryptocurrencies are expected to rebound. Investors should consider accumulating cryptocurrencies during price declines for potential gains as market volatility subsides.