Even after a big correction, which followed weeks of almost complete inactivity, and a new focus on real rates, bitcoin’s most patient investors are still holding onto their coins. The cryptocurrency closed at $25,972.52 on Friday and lost 0.25% for the week – its eight negative week in the past nine, according to Coin Metrics. It had posted an 11% decline for the previous week. Coin Metrics measures a week in crypto, which trades 24 hours a day, from the 4:00 p.m. ET stock market close one Friday to the next. Bitcoin had been almost completely inactive for several weeks leading up to its violent sell-off on Aug. 17 and many investors expected any of several tailwinds the market has been monitoring to eventually push its price higher. Instead, inflation updates and the possibility of more rate hikes have brought more uncertainty into crypto. “There is uncertainty ahead, and the Fed will act if inflation data warrants it,” Oppenheimer’s Owen Lau said following Federal Reserve Chair Jerome Powell’s speech in Jackson Hole, Wyoming , Friday. “The part that could upset the crypto market is if interest rates stay higher for longer, which disappoints the expectation that the rate could be lowered in the first half of 2024. Until the Fed sees a sustained progress, not just the inflation reaches 2%, it appears that the Fed will continue to be restrictive.” Nevertheless, the market has appeared relatively calm. The August dive was the biggest one-day sell-off since the height of the FTX fallout in November. However, an Indicia Labs analysis of social media chatter about crypto shows sentiment only dipped into neutral territory from positive seven full days after the price drop. That decline pales in comparison to the drop that took place in November, when sentiment dropped from positive to neutral in the days leading up to the crash, and slid into “very negative” territory four days later. “There hasn’t really been a big change in fundamentals,” said Gustavo Schwenkler, associate professor at the Leavey School of Business at Santa Clara University and cofounder of Indicia Labs. “Right now what’s really happening is people are just waiting it out. We don’t know what’s going to happen with the SEC or if there will be new policies potentially. It’s been unclear where crypto is going to go in the U.S.” from a regulatory perspective. On top of the regulatory overhang, JPMorgan said Thursday the bitcoin correction could be “partly attributed to the broader correction in risk assets such as equities and in particular tech, which in turn appear to have been induced by frothy positioning in tech, higher U.S. real yields and growth concerns about China ,” but that it ” sees limited downside for crypto markets over the near term.” Trading data also shows long-term investors haven’t been easily shaken by the recent weakness. Investors that have held on to their bitcoin for a year or longer, now make up nearly 70% of bitcoin holders, according to Glassnode. The newest group of long-term holders — specifically, those who have held their bitcoin for one to two years — have fallen (36%) since the beginning of the year, but the number of people who bought between two and three years ago has grown (85.8%). “The number and percentage of bitcoins that have been held for greater than a year is hovering near all-time highs. This tells us that despite the price volatility and recent downdraft in prices, long-term holders are unwavering. This fact, combined with next April’s reward halving, may be the springboard for higher prices in the future,” Greg Cipolaro, global head of research at NYDIG, the crypto subsidiary of Stone Ridge Asset Management, told CNBC. He added that while it’s unclear what exactly accounts for traders’ resilience, maturing crypto investors are becoming more “aware of the cycles associated with bitcoin’s halving and are expecting it to repeat, leading to price appreciation.” —CNBC’s Michael Bloom and Nick Wells contributed reporting.
