Bitcoin Breakout Fades Amid Choppy US Demand, Hawkish Fed

• BTC-USD
• COIN

(Bloomberg) — Bitcoin has struggled to make a convincing break above $80,000 as choppy demand from US investors persists, raising doubts about the strength of the latest rally.

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Inflows into US-listed spot Bitcoin exchange-traded funds picked up in August but have proven inconsistent. The ETFs have seen two days of sizable outflows in the past week. In another sign of weak American demand, the seven-day average of the Coinbase premium, which compares prices on the country’s largest exchange to international platforms, has been negative for over four months. Not even last month’s rally was enough to push it positive.

The mixed signals suggest Bitcoin’s rebound has yet to attract the kind of sustained US buying that accompanied earlier advances. Glassnode said the seven-day average intake for the ETFs reached $290 million a day during the rally, but trading activity was subdued compared with previous bull runs.

“Inflows driven by discrete policy headlines that lack broader market velocity often coincide with local inflection points,” Glassnode said in a note.

At the same time, macro conditions are becoming less supportive.

A hawkish speech from US Federal Reserve Chairman Kevin Warsh at the Jackson Hole symposium last week revived expectations that the central bank may soon raise interest rates to contain inflation. The policy-setting Federal Open Market Committee is scheduled to meet Sept. 15 and 16.

Bitcoin also faces a possible price ceiling. Glassnode estimates that long-term holders are targeting the $83,000 and $86,000 range to sell their Bitcoin, leaving the cryptocurrency below the zone where investors are expected to take profits.

A significant portion of the August rally appeared to be supported by a short squeeze, leaving questions around how much higher Bitcoin could be expected to go in the current environment.

“We suspect that a good chunk of that rally was driven by short covering, which has left positioning close to flat,” said Tony Sycamore, an analyst at IG Australia. “Technically we continue to expect dips back into the mid to low $70s to be well supported by buyers leaning against the 200-day moving average at $69,507.”

Source: finance.yahoo.com