Bitcoin is at $59,250, 3.5% down from seven days ago and still stuck in the same range it has been in since February.

Hopes of a sustained bull market above the previous all time high of $69,000 remain, but they do indeed remain hopes, as Bitcoin looks wobbly with the potential of more downside to come.

Source: BNC Bitcoin Liquid Index

At Tuesday’s market close, Bitcoin suddenly dropped nearly 6%, wiping out the gains it had accrued following a dovish pivot by Federal Reserve Chair Jerome Powell, and a brief bump following RFK Jr.’s endorsement of Trump. Bitcoin briefly fell to as low as $58,200 before recovering to just over $60,100. However, by Wednesday, most of these gains had dissipated, leaving Bitcoin trading around $59,250, and looking flat.

Investors are wary of a potential miscalculation of Fed Chair Powell’s recent dovish comments at the Jackson Hole conference. Initially, traders had quickly priced in a nearly 50% likelihood of a 50-basis-point cut in the Fed’s benchmark fed funds rate at the upcoming September meeting, up from the previously expected 25 basis points. However, with critical economic data including August’s employment and inflation reports still pending, the probability of such a significant rate cut has since decreased to 36%, as per the CME FedWatch tool.

This current downturn has been attributed to fears of a looming U.S. recession and what Goldman Sachs’ head of asset allocation, Christian Mueller-Glissmann, described as “excessive optimism” in the stock market during an August 28 interview on CNBC. Mueller-Glissmann emphasized the fragile market sentiment by referencing the global market crash on August 5, triggered by a decision from Japan’s central bank. He warned that market conditions haven’t significantly improved since then, indicating a persistent over-optimism despite ambiguous macroeconomic signals.

In the Bitcoin futures market, the annualized premium of one-month futures contracts—a measure of market sentiment—fell below the neutral 5% threshold on August 27, hitting its lowest point since October 2023. This drop indicated a bearish outlook among traders, reflected in a 4% decrease in the total open interest for Bitcoin futures, totaling 517,430 BTC as per Coinglass data.

The market dynamics were further complicated by $102 million in forced liquidations of leveraged Bitcoin longs over 48 hours—a modest amount compared to the $311 million liquidated during the August 5 crash. This shows that while the recent price drop did not drastically alter the positioning of major investors, it certainly heightened risk aversion among traders.

The declining network activity on Bitcoin is another factor in dampening investor enthusiasm amidst a challenging macroeconomic backdrop. Recent metrics indicate a noticeable drop in usage, with the number of active addresses on the Bitcoin network reaching its lowest point in two months. This reduction, often linked to decreased retail participation, does not reflect a broadening of Bitcoin adoption, despite potential accumulations by larger investors and institutions.

For the week ending August 26, data from Glassnode revealed that there were 668,732 active addresses engaged in sending or receiving Bitcoin, marking a 4% decrease from the figures reported two weeks prior. This downturn in active addresses is viewed as a precursor to diminished investor interest, particularly among casual and smaller-scale participants.

Additionally, the median transaction volume on Bitcoin has also decreased, falling to 0.00376 BTC, the lowest recorded since December 2023. This decline further emphasizes the reduced activity level and smaller transaction sizes being processed on the Bitcoin network.