Uncertainty in U.S. policy dictating a potential halt in Bitcoin's journey beyond $124,000
The United States Economic Policy Uncertainty (EPU) Index, a key indicator of market performance and predictor of significant events such as recessions, surged to its highest since 2020 on September 15, reaching 939.7. This surge was driven by factors including tariff shocks, persistent inflation above 3%, and heated fiscal disputes in Washington.
Despite Bitcoin setting new highs, the cryptocurrency's Active Addresses (AA) have been falling, signaling a shift in investor behaviour. Traditionally, during bull runs, Bitcoin's on-chain activity surged, with Active Addresses rising alongside price. However, this time around, investors seem to be relying more on exchanges and institutional vehicles rather than on-chain activity.
Crypto analyst Darkforst attributes this evolution to centralized exchanges (CEXs), which now provide extensive services that keep investors engaged on their platforms. The entry of institutional investors has indeed reshaped the market, with players like BlackRock and Fidelity introducing Bitcoin spot ETFs in 2024. These ETFs gave speculators access to BTC without the need for managing wallets, transacting on-chain, or worrying about asset security.
However, the projected risk of 2-5% still looms due to the high EPU Index. Crypto analyst Joao Wedson warns that Bitcoin's performance in January 2024, when the EPU surged to 1,024, could repeat, with Bitcoin dropping 21% from $48,969 to $38,555. U.S. economic data suggests that inflows could shrink further, raising the risk of weaker prices and volumes for Bitcoin.
Contrary to the broader market sentiment, Bitcoin has been struggling to reach a new high after trading up to $124,000. This week alone, investors scooped up $165 million worth of Bitcoin from the market. Despite the declining Active Addresses, accumulation of Bitcoin has been underway for six consecutive weeks, according to CoinGlass.
Sentiment across broader markets points to a different path for Bitcoin. While the EPU Index remains high, the launch of Bitcoin spot ETFs has provided a new avenue for investors to gain exposure to the cryptocurrency. As the market continues to evolve, it will be interesting to see how Bitcoin fares in the face of these pressures.
