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(Kitco News) – The cryptocurrency market came under pressure along with global financial markets on Thursday, as the US Dollar Index (DXY) surged to an intraday high of 109.995, its highest since September 2002.
DXY 1 week chart. Source: TradingView
Few assets were spared as the dollar rose, with the S&P 500, the DOW and the NASDAQ all down at the time of writing, down 1.03%, 0.45% and 1.81%, respectively.
Data from TradingView shows that Bitcoin (BTC) came under pressure in early trade Thursday, taking the top cryptocurrency to a low of $19,582 by midday before being bid back at $19,800.
BTC/USD 4 hour chart. Source: TradingView
The surge in volatility was anticipated by senior Kitco Market analyst Jim Wyckoff, who warned in his morning Bitcoin letter that “calmer sideways trading is here to stay, but likely not for long. History shows that September can be a rocky month for financial markets.”
As for when volatility will subside, Wyckoff suggested it could linger for some time as bullish traders continue to be overwhelmed by bears.
“Look for more volatility in cryptos in the near term. Bitcoin bulls need to show more strength to break the price downtrend that still exists on the daily chart, albeit narrowly,” Wyckoff said.
Further evidence that sentiment surrounding Bitcoin remains negative came from crypto analytics firm Santiment, which published the chart below showing the rise in BTC’s average funding rates.
Bitcoin average funding rates. Source: Santiment
“Traders continue to go blank when prices see notable dumping. According to the average BTC funding rate from Binance, BitMEX, DYDX and FTX, the reaction to Friday’s drop was that the most aggressive traders have cracked down on the markets since May,” Santiment said in the tweet accompanying the chart.
Ethereum shorts are piling up
One of the biggest crypto stories right now is the upcoming Ethereum (ETH) merger, which is expected to happen on September 15th.
While many were anticipating a buy the rumor, sell the news type event, it’s starting to look like the merger has already been factored in, prompting investors to position themselves ahead of a potential downside.
Evidence of Ethereum’s pre-merger bearish positioning can be seen in the chart below from Santiment, who noted that “Ethereum disbelief among traders is strong during a particularly volatile trading week. The crowd has shorted across exchanges in the largest proportion since June 2021.”
Ethereum average funding rates. Source: Santiment
Santiment warned against joining the expected fall in Ether price, emphasizing the fact that “historically, price increases are more common in these conditions.”
As it stands now, Ether is down 0.93% on the 24-hour chart and is trading at $1,554.
A quiet day in the altcoin market
Overall, it was a negative day for the crypto market, with relatively few bright spots amidst a red sea.
Daily performance of the cryptocurrency market. Source: Coin360
Out of the top 200 coins listed on CoinMarketCap, the best performer of the day is Decred (DCR), which posted a gain of $11.7, followed by an 11% surge for Balancer (BAL) and a rise of almost 7% for the Celsius (CEL) token under siege.
The total cryptocurrency market cap is now $967 billion and Bitcoin’s dominance rate is 39%.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of the author Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not an invitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article assume no responsibility for any loss and/or damage resulting from the use of this publication.
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