Digital Crypto Asset, Bitcoin, Drops Below $108k, Possible Threat?

In the world of cryptocurrencies, Bitcoin and other leading digital assets have been experiencing a downturn over the weekend, continuing a trend that began earlier. This decline comes as investors eagerly await the US non-farm payrolls data, hoping to gain insights into the Federal Reserve's potential monetary policy decisions for the month.

The bearish market mood has been intensified by the rise in inflation figures, which have set the stage for a series of large-scale sell-offs by Bitcoin whales. One such whale, with over 100,000 Bitcoins, initiated selling assets last Monday, causing a significant price drop from around $114,000 to $108,600.

This week's market dynamics could be heavily influenced by two major macroeconomic events: a US bond auction on Tuesday and the US non-farm payroll (NFP) release and unemployment figures on Friday. The market is pricing in the possibility that the Federal Reserve could start cutting rates in late September or early October, according to the CME Group's FedWatch Tool, which shows a large 87.6% chance of a 25 basis point rate drop at the September meeting.

Friday's data showed the Fed's preferred inflation gauge, the core PCE Price Index, rose 2.9% in July, marking the highest yearly total since February. This rise in inflation has added to the uncertainty in the market, with investors closely watching the Fed's response.

The selling of Bitcoin assets has not been limited to one player. The sentiment among investors is influenced by significant sales and transfers of Bitcoin from large, dormant wallets. Some of these assets are being converted to Ether (ETH), with a notable example being a large Bitcoin holder recently shifting from Bitcoin to Ether, opening a long position worth $300 million in Ethereum. This whale's move is noted to have contributed to market rotation effects between BTC and ETH.

Despite the challenges, Bitcoin has shown some resilience, recovering to $113,500 by Thursday night, almost close to its pre-disaster value. However, the critical psychological support for Bitcoin remains at $100K, as leveraged positions face pressure. Similarly, Ether's key support is currently at $4,000.

In addition to the Bitcoin market, there has been a noticeable decline in investment flows into Bitcoin exchange-traded funds (ETFs). This trend, combined with the ongoing market volatility and Fed rate speculation, suggests that the cryptocurrency market may continue to face challenging conditions in the near future.