Bitcoin Liquidity Reaches Historic Lows Amid Macroeconomic Uncertainty

Bitcoin (BTC) liquidity has plunged to unprecedented levels, with long-term holders continuing to accumulate the flagship cryptocurrency. Market conditions, dominated by macroeconomic uncertainty—such as weak U.S. employment data, the potential for interest rate cuts, and lingering inflation pressures—have left Bitcoin struggling to breach the $112,000 threshold.

As of September 8 at 8:30 a.m. local time, Bitcoin was trading at KRW 155.41 million on South Korea’s Upbit exchange, reflecting a modest 0.71% increase from the previous day. On Binance, the largest cryptocurrency exchange globally, Bitcoin edged up by 1.12% to $111,500.

In contrast, the CoinDesk 20 Index, which monitors the performance of the top 20 cryptocurrencies, slipped by 0.17% during the same period. Ethereum (ETH) posted a 1.12% rise to $4,330, while XRP recorded a stronger surge of 2.73%, hitting $2.88.

Long-Term Holders Anchor Bitcoin Amid Reduced Liquidations

Data from CoinGlass reveals that Bitcoin liquidations over the past 24 hours totaled approximately $7.06 million (KRW 9.8 billion), with 77.2% being short positions. Across the broader cryptocurrency market, total liquidations reached $13.44 million (KRW 18.68 billion).

The reduced volatility in recent days can be attributed to a significant decline in selling activity among long-term holders. Blockchain analytics platform Glassnode reported that 20,000 BTC were moved into long-term storage over the past month. This accumulation comes despite Bitcoin’s sharp 15% correction from its mid-August peak of $124,000, underlining the resilience and confidence of long-term investors during turbulent market conditions.

Macroeconomic Pressures Limit Bitcoin’s Recovery

Macro headwinds continue to exert pressure on Bitcoin’s market trajectory, despite its steady accumulation by long-term holders. U.S. job growth sharply underperformed in August, with only 22,000 new positions created, far below the forecasted 75,000. Revisions to June and July employment figures revealed additional downward adjustments, amplifying concerns over the state of the labor market.

These weak labor reports have fueled anticipation of an interest rate cut at the Federal Reserve's upcoming September FOMC meeting. Typically, lower interest rates bolster risk assets like Bitcoin by driving broader liquidity. However, fears of a broader economic downturn are dampening the positive effects such monetary policy shifts might ordinarily have on the cryptocurrency market.

Adding to the complexity is volatility in the bond market. Declines in 10-year U.S. Treasury yields could result from short-term interest rate cuts. Nonetheless, analysts warn of potential upward pressure on yields due to ongoing inflation and elevated fiscal expenditures. ING, a Dutch banking group, remarked that “while the labor market is weakening, inflation dynamics and fiscal outlays could lead to a swift rise in yields in the near term.”

Inflation Trends and Key Data to Watch

Investor attention has now turned toward the release of the U.S. Consumer Price Index (CPI), a critical indicator of inflation trends. According to Wells Fargo, the core CPI is projected to rise by 0.3% month-on-month and remain steady at 3.1% year-over-year. Persistent inflation worries are likely to shape the Federal Reserve's interest rate trajectory, with broader implications for risk-sensitive assets like Bitcoin.

Prolonged inflationary pressure may dampen prospects for aggressive rate cuts, reinforcing uncertainties in the broader financial markets. In this context, Bitcoin’s ability to stage a sustainable recovery hinges on how inflation evolves and impacts investor sentiment across both traditional and cryptocurrency markets.

Dimming Crypto Sentiment Amid Market Hesitations

The Alternative Crypto Fear & Greed Index, which measures market sentiment among digital asset investors, has dipped from 48 (Neutral) to 44 (Fear). This drop indicates a growing cautiousness as it moves closer to the index’s lower extremity, signaling stronger selling pressure across the board. Higher readings on the index generally suggest a bullish outlook, marked by increased buying activity.

As Bitcoin navigates murky waters dominated by macroeconomic instability, tightening liquidity, and shifting investor sentiment, its ability to find a stable foothold remains uncertain. Analysts and investors are watching closely to see whether Bitcoin can overcome these challenges and regain upward momentum in the short to medium term.