The bullish momentum that propelled Bitcoin BTC 
$29,228 to a 75% year-to-date gain all but vanished on Aug. 1 as Bitcoin price closed out the month of July down 5.4%. Bitcoin price briefly fell below $29,000 on July 31 and remains under that key resistance level.
The contraction in Bitcoin price has some analysts cautioning that BTC risks dipping to $25,000.
Let’s take a closer look at the factors impacting Bitcoin price today.
Bitcoin’s market structure turns bearish
Bitcoin’s market structure had been bullish for the past few months, but recent price action has turned the market structure bearish within a shorter time frame, according to independent market analyst Charles Edwards.
Edwards highlighted the recent divergence in the correlation between the S&P 500 and Bitcoin price,
“At the same time that Bitcoin has been faltering, the S&P 500 has had its longest winning streak in years and the Fed has essentially paused rate hikes at what is now the tightest monetary policy regime on record.”
Edwards went on to highlight new key Bitcoin price support levels of $28,000, $26,000 and as low as $20,000.
While Federal Reserve chair Jerome Powell did not make definitive statements regarding the Sept. 20 interest rate decision, the market seems to confidently believe that the Fed will pause interest rate increases again.
CME’s FedWatch tool shows the overwhelming market belief that such increases are coming at the next FOMC. As of August 1, the probability of an interest rate pause sits at 81.5%.
Crypto investor sentiment continues to decline
Since July 31, over $20 million in Bitcoin longs were liquidated. When BTC longs are liquidated without buy pressure from trading volume, Bitcoin price is negatively affected. Bitcoin volume has hit the lowest levels since early 2021.
The absence of new volume has sent the Fear and Greed Index, a key investor sentiment gauge, into a downslide since the start of July. Despite starting July with a “greed” sentiment, the index now shows neutral market feelings.
Protocol exploits and the loss of investor funds is likely another factor impacting Bitcoin price in the short-term.
In addition to the Curve scenario introducing contagion risk to DeFi and the crypto sector, an alleged rug pull on Coinbase’s layer 2 BASE from the BALD developer is likely impacting investor sentiment. The theft of investor funds came right before the SEC filed a complaint on July 31 against Hex founder, Richard Heart for using more than $12 million of investor funds to buy high-end luxury items including a 555-carat diamond.
Over the weekend, Coinbase CEO Brian Armstrong reportedly claimed the SEC requested all crypto aside from Bitcoin needs to be delisted. Coinbase and the SEC have both denied this accusation.
Short-term pain, long-term gains?
The short-term uncertainty in the crypto market does not appear to have changed institutional investors’ long-term outlook. Recently, despite a hostile U.S. regulatory environment, large institutions are pushing for Bitcoin financial instruments which may spark a bull run. Grayscale directly urged the SEC to approve all Bitcoin ETFs.
Bitcoin price continues to be directly impacted by macroeconomic events, and it is also likely that further regulatory actions and interest rate hikes will continue having some effect on BTC price.
Markus Levin, co-founder of XYO Network, provided insight into the current Bitcoin price action,
“It’s no surprise that we’re seeing Bitcoin in somewhat of a slump given that it’s the dog days of summer. Volumes are down. Retail traders aren’t coming into the crypto markets more generally. The macro backdrop clearly is playing a role here, with interest rates relatively high. But I should note that we’re in a part of the four-year cycle in which this kind of lack of interest isn’t all that surprising. We’re out of the blowup phase and clearly in the boredom phase.”
In the long term, market participants still expect the price of Bitcoin to recover, especially as more financial institutions are seemingly embracing BTC.
