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Coming off a dip into negative territory in August, Bitcoin appears to be experiencing its perennial September drift once again. Google Trends suggests that this is at least partly due to a drop-off in public interest for BTC for now.
Since dropping below the $60,000 mark earlier in the month, Bitcoin briefly found itself languishing below $56,000. Some market analysts predict a further fall in the next week, perhaps even going as low as $50,000.
While this isn't the best news for investors and traders, people who use Bitcoin to pay for online goods and services shouldn't have to worry too much. The drop in price mainly affects those who use Bitcoin as an investment tool. With market sentiment heavily influencing supply and demand, the dip indicates a lack on the demand side, driving down the value for anyone wishing to sell.
The upshot is that a lower valuation can also serve as an incentive for new users to join the market, as the price of entry is consequently lower. As crypto writer Gary McLellan points out, this can be a boon for certain industries.
For example, online platforms like game streaming services and Bitcoin casinos are able to attract more new players. A lower price enables cheaper subscriptions and in-game purchases for the former but lower buy-ins and a lower spend requirement for minimum bets at the latter.
Bitcoin casinos have been particularly popular among crypto enthusiasts. As crypto transactions enable added perks like anonymous gambling, faster sign up procedures, and better bonus options, players have been flocking to these platforms. During periods when BTC dips in value, many of these sites see more activity but it can also mean lower payouts so it’s a trade-off either way.
Overall Interest in Bitcoin Cooling?
Google Trends data currently reflects a lull in global enthusiasm for cryptocurrency. This is nothing new, of course, with investors by now used to the rise and fall in value over the years. A superficial yet still meaningful metric is that “bitcoin" searches have dropped from an indexed score of 57/100 in early January 2024, to 32/100 in September.
This is a fall of almost 45%. Furthermore, when compared with the trend over the last five years, the data seems to indicate that the BTC market is in something of a lull. Some suggest that this is a holding pattern, where the market is neither bullish nor bearish, as traders wait for further indications; the phenomenon is also behind the caginess that is contributing to the lag in BTC's value. According to this theory, the knock-on effect of this is causing a lack of demand growth.
Digging Into the Details
While not perilous, Bitcoin's drop in valuation has affected the entire crypto market. The currency dropped by 5.8% against the dollar in the first week of September, losing 2.5% in a single day on September 4. It hit a mid-day low of $55,602 but recovered to around $57,000 the next day.
Bitcoin's market cap remains at a relatively solid $1.1 trillion, which accounts for more than half the total valuation of all cryptocurrencies. As a result of this large market share, the total value of the crypto market dropped below $2 trillion on September 4th, due to the BTC dip.
This can be attributed to a contagion effect. As Bitcoin's price took a dive, it pulled other cryptocurrencies down with it. Solana saw the biggest decrease, losing 2.82% of its value, while Ethereum experienced a slightly milder slump of 2.23%.
At the same time, it's worth noting that Bitcoin's price is still higher than it was at the same time this past August. In fact, it's gained 13% in value since then, despite the current downturn where it lost just under $30 billion of its market capitalization.
The Fear Factor
More often than not, market values are driven by investor sentiment, rather than rational analysis, as we all know far too well. Some of the more alarmist analysts have been characterizing the current sentiment as one of "extreme fear". While this might sound hyperbolic, and par for the course among cryptocurrency detractors, this does indeed have a statistical basis.
According to the Crypto Fear & Greed Index, Bitcoin currently has its lowest score since this time in August. The index measures market sentiment on a scale from 1-100, with lower numbers indicating fear and higher ones pointing to a greedy approach from traders.
By these metrics, the August index crossed the threshold from "fear" to "extreme fear", with a score of 20/100. By September 6 it once again entered this zone, dropping by 7 points from the day before to land at 22/100.
This led to significant investor liquidations of cryptocurrencies, to the tune of roughly $94 million in total. About 40% of this was due to those who had taken long positions on BTC deciding to sell. Long bet liquidations totaled around $71 million, with Bitcoin accounting for about $37 million of that.
Trading Volume is Still Up
Despite all of this, crypto trading volume rose by 36% on Wednesday, Sept 4 – the same day that saw Bitcoin's slump. This amounted to a total of around $70 billion, of which BTC gained $33.8 billion. This put the currency's global average at around $56,000. South Korean platforms Upbit and Bithumb put its value slightly higher, at just over $57,000 per Bitcoin.
To Bear or To Bull?
Many analysts are pointing out that this could simply be a case of investors and traders in a holding pattern, rather than portending a further devaluation. Some, like Julio Moreno, head of research at cryptoquant.com, point to the seasonal uptick in Bitcoin in the last quarter of the year as a reason to be positive, subject to current market and economic conditions.
While many are treating this as a bearish market, others expect a further twist, given past volatility and bounce-backs. No one can predict what will happen in Q4. While statistics are revealing to an extent, current sentiment appears to be split between those who feel that the demand stagnation will continue for a while, and those who believe that Bitcoin could go against the trend and start moving upwards again shortly.
The notion that the current slump has simply been caused by a temporary lack of demand gives further hope for a recovery. Trading volumes are still up, and market interest in cryptocurrencies remains high, with many adopting a cautiously optimistic wait-and-see approach.
