Bitcoin’s Recovery Falters as Nvidia’s Pre-Earnings Decline Heightens Risk Aversion

On a serene summer evening in the United States, the tranquility was disrupted as bitcoin (BTC) took a sudden nosedive of nearly 6%, swiftly wiping out substantial gains observed earlier in the week following a more dovish stance from Federal Reserve Chair Jerome Powell and the alignment of pro-crypto presidential candidates Donald Trump and RFK Jr.

After dipping to as low as $58,200, bitcoin managed to climb back above $60,100 during early U.S. trading on Friday. However, this rebound has largely dissipated as noon approaches, with bitcoin currently resting at $58,800, reflecting a 4.5% decline over the past 24 hours. Concurrently, the broader CoinDesk 20 Index has also experienced a comparable downturn.

Ether (ETH) managed to outperform slightly, registering a 4% drop in the last day. Nevertheless, in the longer term, the second-largest cryptocurrency has witnessed a 21% decline in price relative to bitcoin this year, marking its lowest level since April 2021. Currently valued at $2,490, ether’s year-to-date growth for 2024 has dwindled to just 9%, in contrast to bitcoin’s robust 39% surge.

The divergence between bitcoin and ether can be attributed to the contrasting performance of spot ETF launches this year. While bitcoin funds have attracted over $10 billion in net inflows, ether vehicles have been losing assets since their inception.

The macroeconomic landscape has become less favorable for cryptocurrencies, with declines in major U.S. stock indices, notably a 1.3% retreat in the tech-heavy Nasdaq. Nvidia (NVDA) contributed to Nasdaq’s decline with a 3% drop ahead of its quarterly earnings release scheduled after the bell on Wednesday. Despite being slightly below its summer peak, Nvidia has still soared by 159% year-to-date, leaving room for a decline should the company fail to meet market expectations.

Investor sentiment has been swayed by Federal Reserve Chair Powell’s recent dovish comments at the Jackson Hole conference, with traders now pricing in a nearly 50% probability of a 50 basis point rate cut at the upcoming September meeting, higher than the previously anticipated 25 basis points. However, upcoming data releases, including August’s employment and inflation reports, will play a crucial role in determining the Fed’s decision. Currently, the likelihood of a 50 basis point rate cut has decreased to 36%, according to CME FedWatch.