Bitcoin at Risk After Falling Below $108,000?

Over the weekend, Bitcoin, Ether, and other leading cryptos extended their downturn as traders analyzed macroeconomic data to understand the rate path ahead of the Federal Reserve meeting later this month.

The market is pricing in the possibility that the Fed would start cutting rates in late September or early October, so there are some bright spots in the longer run.

Nevertheless, the short-term investor mood has not been greatly improved by these prospects.

There are no obvious indications of a resurgence for Bitcoin, and the cryptocurrency is now navigating difficult conditions as it tries to hold a position above $108,000.

The price of Bitcoin fell almost 4% last week.

Investors who saw the price of the crypto surge beyond $125,000 before tumbling down to the $100,000 level are understandably unsettled by this scenario, which is indicative of the extremely unpredictable nature of Bitcoin.

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, traders are exercising extreme caution.

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 declining investment flows into Bitcoin exchange-traded funds (ETFs).

The end-of-week decline in the Dow, S&P 500, and Nasdaq also weighed on cryptos.

The tariff threats from President Trump and his efforts to influence the Fed board have intensified the situation, further exacerbated by the market's responses to these developments.

This week's market dynamics could be shaped by two major macroeconomic events.

On Tuesday, there will be a US bond auction, where about $290 billion in short-term bonds will be offered to the public. This could reduce liquidity and add pressure to Bitcoin.

On Friday, we will receive the US non-farm payroll (NFP) release and unemployment figures. 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.

Whales Switching to Ether Hurting Bitcoin?

A deeper look shows that a significant whale trader and an unstable stock market are initiating the challenges for the OG cryptocurrency.

The price drop was mostly caused by one long-term Bitcoin holder. According to data compiled by Lookonchain, an on-chain analytics company, this "whale" was in possession of over 100,000 Bitcoins.

The large holders started selling Bitcoin assets on Hyperliquid and other marketplaces last Monday, switching to Ethereum.

The price of Bitcoin fell from around $114,000 to $108,600 as a result of the slump that lasted for more than a day.

However, once the market recognized the reason as an isolated incident, it reversed and started to recover.

Bitcoin had recovered to $113,500 by Thursday night, almost close to its pre-disaster value.

According to TradingView, the critical psychological support for Bitcoin is positioned at $100K, as leveraged positions face pressure, indicating a delicate liquidity situation.

Ether's key support is currently at $4,000.

A breach of these supports may lead to a significant downturn and an extensive liquidity squeeze, although a complete bear market would necessitate a more prolonged downturn.

What the Macro Background is Telling Us

Friday's data showed the Fed's preferred inflation gauge, the core PCE Price Index, rose 2.9% in July. While that was broadly in line with expectations, it was the highest yearly total since February.

The pace is what is weighing on sentiment, just when Fed boss Jerome Powell switched his tone at Jackson Hole, hinting at a rate cut this month.

The inflation figures intensified the bearish market mood set by a string of large-scale sell-offs by Bitcoin whales, underscored by the liquidation of leveraged holdings.

Investors now eye the US non-farm payrolls data to understand if the Fed will bring out its knife this month.

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.

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