Bitcoin (BTC) has wrapped up a distinctly challenging week, marking what historically stands as its third-worst performance of the year, with a notable decline of over 5%. As week 38 signals the close of the third quarter, Bitcoin has seen an overall 1% increase during this period, while September remains relatively stable.
This quarterly performance aligns with the historical trend of September being one of the least favorable months for cryptocurrencies, but various factors have contributed to this particular downturn. Notably, a massive expiration of options on Friday, amounting to over $17 billion, coincided with a so-called “max pain” price set at $110,000. This strike price became a pivotal point for Bitcoin’s spot price, akin to an invisible gravitational force.
Another significant technical indicator is the short-term holder cost basis, which currently stands at $110,775, representing the average acquisition price for Bitcoin transactions that occurred within the last six months. Bitcoin’s price trajectory often gravitates toward this marker, especially in bullish phases. This year, the cryptocurrency has only dipped significantly below this threshold once—during the market turbulence of April, seeing lows around $74,500.
To gauge whether the current uptrend in Bitcoin remains intact, analysts are closely watching its performance relative to critical moving averages. Analyst Caleb Franzen pointed out that Bitcoin has fallen below its 100-day exponential moving average (EMA), while the 200-day EMA resides at $106,186. Crucially, it will need to maintain a position above the previous significant low of $107,252 established on September 1 to sustain the overarching bullish narrative.
In a broader economic context, the U.S. economy exhibited robust growth, expanding at an annualized rate of 3.8% in the second quarter, surpassing initial estimates of 3.3%. Additionally, initial jobless claims witnessed a decrease of 14,000, reaching levels below expectations and marking the lowest figures seen since mid-July. Meanwhile, inflationary pressures compacted, with the core Personal Consumption Expenditures (PCE) index, the Fed’s favored inflation measure excluding food and energy, experiencing a 0.2% uptick in August.
Interest rates have reflected this dynamic, with the yield on 10-year U.S. Treasuries rebounding from 4% support and now trading around 4.2%. The dollar index (DXY) lingers near long-term support at 98, while precious metals, particularly silver, are nearing record highs last observed in the 1980s and 2011. In contrast, Bitcoin remains distinctly below its peak, more than 10% off from its previous highs.
On the corporate front, companies with significant Bitcoin treasury holdings are facing ongoing challenges, particularly in terms of multiple-to-net-asset-value (mNAV) compression. Notably, MicroStrategy (MSTR) is barely breaking even on the year, having slid below the $300 mark at one point—a concerning signal for its annual performance.
The valuation ratio between MicroStrategy and the BlackRock iShares Bitcoin Trust ETF (IBIT) is currently at 4.8, indicating its underperformance relative to Bitcoin throughout the past year. Presently, MSTR’s enterprise mNAV is noted at 1.44, factoring in all outstanding basic shares, total notional debt, and overall stock value minus cash reserves.
Despite the pressures, there exists a silver lining for entities like MSTR, as a portion of their preferred stocks has shown positive lifetime returns. Executive Chairman Michael Saylor remains intent on accumulating more Bitcoin through these vehicles. However, a pressing concern looms; the volatility of Bitcoin has dipped below 40, reflecting diminished market expectations for future price movements. Saylor has marketed MicroStrategy as a volatility investment in Bitcoin, creating implications for its long-term growth outlook.
