Plunge in Bitcoin Value Possible as Price Dips Below $108,000?

In the ever-evolving world of cryptocurrencies, Bitcoin and Ethereum are currently navigating challenging conditions.

The key psychological support for Bitcoin remains at $100,000, indicating a delicate liquidity situation. Last week, the price of Bitcoin fell almost 4%, dropping to around $108,000, a level it is now trying to hold. This sell-off was primarily concentrated on Hyperliquid and other marketplaces, and the whale who initiated the sell-off holds over 100,000 Bitcoins.

Meanwhile, the price of Ether has seen a significant shift, with a major Bitcoin whale, known as "Bitcoin OG," selling 4,000 BTC worth around $435 million and buying about 96,859 Ether, increasing its Ethereum holdings to $3.8 billion. This strategic rotation from Bitcoin to Ether has undeniably influenced Bitcoin's price development.

The market is pricing in the possibility that the Federal Reserve may start cutting rates in late September or early October, a move that could potentially boost risk assets like Bitcoin. However, the pace of inflation is weighing on sentiment, despite Fed boss Jerome Powell hinting at a rate cut this month at Jackson Hole.

Friday's data showed the Fed's preferred inflation gauge, the core PCE Price Index, rose 2.9% in July, the highest yearly total since February. This rise in inflation has intensified the bearish market mood set by a string of large-scale sell-offs by Bitcoin whales.

Investors now eye the US non-farm payrolls data to understand if the Fed will bring out its knife this month. If the NFP is weak, falling below 60,000, expectations for continued interest rate cuts could rise, which could lead to risk assets like Bitcoin seeing a boost.

This week's market dynamics could be shaped by two major macroeconomic events: a US bond auction on Tuesday and the US non-farm payroll (NFP) release and unemployment figures on Friday. Traders are exercising extreme caution due to Monday's Labor Day holiday closure of Wall Street and the persistent fear that a Bitcoin whale may dump another billion dollars' worth of BTC into the market.

There are declining investment flows into Bitcoin exchange-traded funds (ETFs), a trend that has been observed over the past few weeks. Despite the rise in inflation pace, the CME Group's FedWatch Tool shows a large 87.6% chance of a 25 basis point rate drop at the September meeting.

The sentiment among investors is influenced by several elements, such as significant sales and transfers of Bitcoin from large, dormant wallets, the conversion of these assets to Ether (ETH), and the end-of-week decline in the Dow, S&P 500, and Nasdaq.

As the market continues to evolve, the relationship between Bitcoin, Ethereum, and traditional financial markets remains a key factor in understanding the direction of these cryptocurrencies.