Bitcoin price loses traction as miner profits drop and spot BTC outflows persist

Bitcoin (BTC) price dropped 10% over the 10 days ending on Sept. 3, falling from $64,190 to $57,800. This decline occurred despite the S&P 500 index being just 2% below its all-time high and gold trading only $50 away from its historical peak. While some cryptocurrency investors attribute Bitcoin’s dip to the broader macroeconomic environment, other factors are also pushing its price below $59,000.

Macroeconomics are bearish but traders sense a trend change 

Trader DamiDefi explains that Bitcoin has been influenced by recession concerns in the United States, but that trend is stabilizing as the focus shifts to “monetary policy and the US dollar’s performance.” The “bullish narrative” for Bitcoin going forward will hinge on the expectation of a “looser Federal Reserve policy, […] such as lowering interest rates.” Essentially, traders anticipate that the US will be compelled to implement expansionary measures to stimulate the economy.

In addition to the stock market and gold, traders have also been accumulating US government debt, as the 2-year Treasury yield fell to 3.88% on Sept. 3 from 4.06% two weeks earlier. This trend indicates that investors are accepting lower returns in exchange for what is considered the safest asset. Part of this uncertainty stems from the job market, where July’s data showed a slowdown, with unemployment reaching 4.3%.

On one hand, the US central bank has reduced inflationary pressures, as the CPI slowed to 2.9% in July, the lowest rate since March 2021. On the other hand, if continuing jobless claims keep rising, the chances of a total 0.75% interest rate reduction by year-end will be slim. Currently, the market prices in a 74% probability that FOMC rates will fall below 4.50% by Dec. 18, leaving room for potential disappointment if macroeconomic data shifts.

The next jobs report is scheduled for Sept. 6, with Morgan Stanley economists forecasting that the US economy added 185,000 jobs in August, a number sufficient to support a 0.25% interest rate cut from the Federal Reserve, according to Yahoo Finance. Skepticism among traditional finance investors became apparent when Nvidia (NVDA) reported earnings that exceeded market expectations, yet the stock dropped 6% in the following trading session.

Still, this doesn’t fully explain why Bitcoin has been underperforming compared to other markets, including the Russell 2000 index of US-listed small-cap companies, which has remained relatively flat over the past ten days. 

Spot Bitcoin ETF outflows and declining mining profitability weigh on investors’ sentiment

Part of the rationale may be the persistent pessimism driven by outflows from spot Bitcoin exchange-traded funds (ETFs). The longer these instruments fail to attract inflows, the more negative attention they receive.

Between Aug. 27 and Aug. 30, spot Bitcoin ETFs saw $480 million in net outflows, effectively erasing the $455 million in inflows from the prior two days, according to Farside Investors data. While this pattern is not unusual and doesn’t necessarily indicate a shift in investors’ perception of Bitcoin’s utility and value, the headlines alone can cause traders to question whether smart money anticipates further BTC price declines.

Lastly, Bitcoin investors are concerned that miner profitability, now nearing all-time lows, could trigger a sell-off. Miners currently hold over BTC 1.8 million, a figure that has remained essentially unchanged over the past two months. This concern is heightened by the recent decline in Bitcoin’s hashrate index, which measures the expected earnings from a specific amount of mining power (hashrate).

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According to Hashrateindex.com, this metric has dropped to $42 per PH per day, down from $48 per PH per day two months ago. The hashrate index is influenced by factors such as network difficulty, Bitcoin’s price, and transaction fees, which are correlated with trading volumes. Traders fear that miners may be forced to liquidate their holdings to cover maintenance costs and meet debt obligations, further contributing to the perceived risks in the current macroeconomic environment.