Bitcoin's price recently dropped below $56,000, which pushed market sentiment into "extreme fear" territory. BitMEX co-founder Arthur Hayes also predicts a further 12% price decline that could push Bitcoin below $50,000. Despite this, some traders are still optimistic about Bitcoin's future performance, yet Bitcoin ETFs are still dealing with continuous outflows. On the other hand, Bitcoin DeFi is gaining some traction, and some developers predict it could even surpass Ethereum's dominance in DeFi within the next two years.
Arthur Hayes Warns of Further BTC Declines
The crypto market sentiment has slipped back into "extreme fear" territory after Bitcoin (BTC) briefly dropped below $56,000. BitMEX co-founder Arthur Hayes also predicted a further 12% decline that could see Bitcoin fall below $50,000 over the weekend.
The Crypto Fear & Greed Index, which measures market sentiment and trends on a scale of 100, fell to a score of 22 on Sept. 6, indicating "extreme fear." This is a seven-point drop from the previous day's "fear" rating and is the lowest score since Aug. 8, when the index hit 20.
Crypto fear & greed index (Source: Alternative)
Bitcoin's price touched a low of $55,838 after a sharp decline from over $58,000. This erased $29.7 billion from its market capitalization. According to data from CoinMarketCap, BTC is trading hands at $55,767.64 at press time after its price dipped by over 2% throughout the past 24 hours of trading. Arthur Hayes believes that Bitcoin is under pressure and expects the price to drop even more over the weekend.
This drop in Bitcoin's price comes amid broader concerns about the United States economy, particularly with regards to a potential Federal Reserve interest rate cut later this month.
The decline in Bitcoin's value has also impacted some other major cryptos. Ethereum’s (ETH) price also fell by more than 2% since yesterday. As a result, the altcoin is worth close to $2,346.67 at press time. Both Solana (SOL) and XRP also saw their prices decline by over 2% during the same time period.
The broad sell-off resulted in $94.26 million in liquidations in the last 24 hours, largely from those betting that Bitcoin’s price will rise.
Liquidation heatmap (Source: Goinglass)
Traders Brush Off Fears of September Bitcoin Slump
Some Bitcoin traders are still very hopeful despite concerns about the usual September market downturn, even though historical trends suggest otherwise. Ed Hindi, chief investment officer at Tyr Capital, pointed out that while September has typically been a negative month for Bitcoin, a potential Federal Reserve rate cut and a strong U.S. economy could catch bears off guard. Hindi stated that the chances of Bitcoin surpassing $60,000 are much higher than it dropping below that level.
Well known trader Daan Crypto Trades shared that despite its reputation, Bitcoin’s average return in September is around -4%, which he considers moderate when considering the asset's volatility. CoinGlass data supports this, and revealed that September has historically been Bitcoin’s worst month, with an average monthly loss of 4.89% over the past 11 years.
Bitcoin monthly returns (Source: Coinglass)
Daan Crypto Trades added that he is closely monitoring Bitcoin's price chart for a "higher high and higher low," which is a signal that buyers are gaining the upper hand in the market. He also indicated that Bitcoin needs to climb back above $65,000 to display any real strength.
This comes after analyst Matthew Hyland placed a lot of emphasis on how important it is for Bitcoin to bounce back and achieve a higher high, especially after it dropped below $58,000 on Aug. 30. Hyland also believes that a price action like this will confirm the uptrend Bitcoin has been in since August.
Spot Bitcoin Funds Face Seventh Day of Outflows
While some traders are optimistic about BTC’s possible performance for September, Bitcoin exchange-traded funds (ETFs) are still bleeding. The U.S. spot Bitcoin ETFs experienced $211.15 million in net outflows on Thursday, making it the seventh consecutive day of negative flows.
Bitcoin ETF flow (Source: Farside Investors)
Fidelity’s FBTC led with $149.49 million in outflows, followed by Bitwise’s BITB with $30 million. Grayscale’s GBTC and mini trust also saw outflows, with $23.22 million and $8.45 million, respectively.
No spot Bitcoin ETFs recorded any net inflows, and eight other funds, including BlackRock’s IBIT, reported zero flows for the day. The daily trading volume for the 12 ETFs dropped to $1.35 billion, which is down from the $1.41 billion that was recorded on the previous day.
Meanwhile, spot Ethereum ETFs in the U.S. saw smaller movements, with $152,720 in net outflows on Thursday. Grayscale’s ETHE reported $7.39 million in outflows, while the Ethereum Mini Trust saw $7.24 million in inflows.
Seven other Ethereum ETFs recorded zero flows for the day. The daily trading volume for Ethereum funds also declined to $108.59 million, compared to $145.86 million the day before.
Ethereum ETF flow (Source: Farside Investors)
Augustine Fan, head of insights at SOFA.org, believes that the ideal scenario for equities and Bitcoin would be a slightly weaker report that doesn’t raise recession concerns but allows the Federal Reserve to remain on track with its economic plans.
Bitcoin DeFi Could Overtake Ethereum
The total capital being put to use in Bitcoin-based decentralized finance (DeFi) protocols could surpass that of the Ethereum network in the next two years, according to Bitcoin DeFi developer Brendon Sedo. At Korea Blockchain Week, Sedo, an initial contributor at Bitcoin sidechain Core DAO stated that the trillion dollars currently held in the Bitcoin ecosystem will gradually move on-chain, which could potentially flip Ethereum’s dominance in DeFi.
Sedo pointed out that as Bitcoin's value is continuously rising and more institutional capital is drawn in through exchange-traded products (ETPs), it is likely that a lot of this capital will flow into Bitcoin sidechains and DeFi applications. Solutions like trustless bridges and roll-ups are expected to facilitate this transition, unlocking significant liquidity for on-chain opportunities in the Bitcoin ecosystem.
The recent approval of spot Bitcoin ETFs has boosted development activity around Bitcoin sidechains like Core, Bitlayer, and Stacks, driving interest in Bitcoin scalability. However, Sedo shared that for Bitcoin’s DeFi total value locked (TVL) to surpass Ethereum’s, more Bitcoin holders have to embrace putting their assets to work in DeFi. This shift has been hindered by skepticism after the collapses of platforms like BlockFi and Celsius in 2022.
Despite the past losses, Sedo believes that Bitcoiners’ attitudes are changing, particularly towards non-custodial DeFi applications. He also noticed a shift in sentiment at the recent Bitcoin 2024 conference, where builders were excited by the growing potential of Bitcoin’s DeFi ecosystem.
TVL of all Bitcoin sidechains (Source: DeFiLlama)
Sedo is very confident in Core’s staking system, which is entirely non-custodial and allows users to time lock their Bitcoin in exchange for a 3% yield paid out in CORE tokens, which are used for gas and governance on the network. Core also recently overtook Bitlayer to become the largest Bitcoin sidechain, with $314.4 million in TVL and over 5,500 BTC staked on its network. Core accounts for about 26.33% of the total TVL across all Bitcoin sidechains, according to DeFiLlama.
