Bitcoin’s price fell below $19K this week. Why September could be even worse

Bitcoin’s price fell below $19,000 this week for the first time since the crypto market crash in June, and some experts say it could fall further this month.

Bitcoin and Ethereum prices have been on a downward spiral since a mini-rally in early August, with no end in sight to the macroeconomic factors experts say will hold them down. September also has a record of poor performance – more bad news for bitcoin and ethereum, which increasingly track the performance of the stock market.

Bitcoin and ethereum prices fell last week after Federal Reserve Chairman Jerome Powell hinted at more federal interest rate hikes ahead. It may be a sign of things to come: The next Fed meeting will take place on 20-21. September, and a new interest rate increase is expected.

Global conflicts and challenges contribute to America’s stubborn inflation, experts say. Russia’s war in Ukraine is in its seventh month, and the related European energy crisis is likely to lead to a tough winter. And then there is the strained relationship between the US and China.

“The geopolitical situation dominates the conversation. Continued war means continued inflation, says Martin Hiesboeck, head of blockchain and crypto research at Uphold. “At the same time, we have a situation we’ve never had before: near full employment, an expanding economy, and yet unprecedented price increases.”

Here’s why all of this could spell trouble for bitcoin and ethereum prices this month:

How the economy affects riskier assets like crypto

When economic uncertainty is high, confidence in riskier assets such as crypto and technology stocks declines.

“The retail trader is starting to panic again as meme stocks and cryptos come under pressure,” according to Edward Moya, a senior market analyst at brokerage Oanda. Moya continues to see a correlation between bitcoin and tech stocks, and “that could mean trouble for bitcoin.”

As US companies continue to reduce the number of employees via layoffs, the stock market continues to lag behind. The consequences for bitcoin, ethereum and the crypto market are clear, according to Moya.

“If the sentiment remains that there will be a bad September swoon on Wall Street, a retest of the summer lows seems inevitable,” says Moya.

Crypto expert and market analyst Wendy O says bitcoin needs to move above $26,700 for her to be bullish in the short term. Bitcoin has not been near that price since June.

“Are we going to make it? I don’t know yet, but one thing I notice about bitcoin is that we kissed $24,800 [on July 30] and we had a couple of attempts to sustain and reverse, but we couldn’t do it,” says O. “We might get a little retest, but then continue to go up.”

Moya and O have both said that bitcoin could still fall to $10,000 or lower before there is any reason to believe we will emerge from the current crypto winter.

How Persistent Global Conflict Can Keep Crypto Prices Down

Geopolitical tensions have had a negative effect on crypto prices in recent weeks.

Cryptocurrencies could fall back to lows seen in June, possibly even further, if geopolitical tensions continue to intensify around the world, experts say. While July was the best month since 2020 for stocks and crypto, rising tensions between China and the US, the two largest economies in the world, “will not support risk appetite anytime soon,” according to Moya.

“The macroeconomic environment continues to create fear for investors, as the European energy crisis dominates the headlines,” according to Marcus Sotiriou, a market analyst at digital asset broker GlobalBlock. “Germany’s sanctions against Russia have led to the shutdown of the NordStream pipeline, resulting in increased gas prices.”

The crypto market has been closely correlated with the stock market since the start of the year, so when stocks fall due to the current conflicts in the world, cryptocurrencies are most likely to as well. On top of that, the US economy is struggling with four decades of high inflation, rising interest rates and a potential recession. Hiesboeck says that more uncertainty about world politics and the US economy means more unpredictability in the markets, and “investors don’t like uncertainty.”

“The rally in July was just an interlude, driven by purely short-term opportunities and not long-term positioning by major players,” says Hiesboeck.

How crypto investors should deal with market volatility and uncertainty

If you are a long-term investor, short-term volatility should not drastically change your crypto investment strategy.

Experts recommend sticking to bitcoin and ethereum, the two most well-known and established cryptocurrencies, and not allocating more than 5% of your investment portfolio to crypto. Always prioritize more important aspects of your finances—like saving for an emergency, contributing to a traditional retirement account, and paying off high-interest debt—before investing in crypto. You should only invest what you are comfortable losing, experts say.

Cryptocurrencies are highly volatile and risky assets – much more so than stocks – and economic and political uncertainty can create even more volatility in the markets. While bitcoin and ethereum have seen some significant gains in the past week, they are still far from their all-time highs of last November.

One thing is certain: there is a growing list of potential concerns over the US economy and escalating global conflicts, so experts recommend playing it safe with your investments in the meantime.