• Cryptos trade lower due to overall negative market sentiment

• Spot ETFs outflow confirm investors’ lower appetite

• Cryptos desperately looking for new bullish catalysts

• Ethereum a tad above some key support levels

The cryptocurrency world remains under severe pressure with bitcoin repeatedly failing to climb above the $60k area. The downward trend from the March highs is still in place, with a series of lower highs setting the bearish tone and pushing the king of cryptos around 4% in the red in September. With stock indices proving fragile at this juncture, the overall market sentiment is proving negative for the much riskier cryptos.

This lack of appetite for cryptos is also reflected in the much talked about spot ETFs. Both bitcoin and Ethereum ETFs continue to experience significant outflows, as investors look for safer short-term investments or remain on the sidelines ahead of the next big events. This attitude matches the reaction seen in other risky markets like equities. Interestingly, the overall weakness in the crypto market and the reduced interest in spot ETFs could delay further new spot ETF listings with solana potentially being negatively affected.

Cryptocurrencies are looking for new catalysts for another bull run with one eye on the US presidential race and the other on the Fed meeting. The former is important from a medium-term perspective with Trump advertising himself as a big supporter of cryptos. The same cannot be said for Democrat candidate Harris although her PAC, the vehicle used to collect donations to fund her presidential campaign, is accepting donations in cryptos. 

The other key factor is the imminent Fed rate cut. The size of this move will probably be determined by today's non-farm payrolls figures although the recent mixed data is probably going to stop the Fed from announcing a 50bps rate cut. Historically, the Fed has repeatedly started its easing path with a 50bps rate move but this looks less likely this time around. Therefore, a 25bps cut is looking the most likely scenario.

Interestingly, the one month rolling correlation using daily returns between bitcoin and the S&P 500 index is currently quite high, and just a tad below its highest level in 2024. This means that should the market become disappointed by Fed actions, cryptos could suffer significantly, potentially confirming the market’s belief that cryptos are yet to become a credible gold alternative.

From a technical analysis perspective, ethereum has been on a downward trend since the March 12 high with a series of lower highs confirming this trend. The bulls have been trying to recover part of their summer losses, but the resistance set by the 50% Fibonacci retracement of the October 12, 2023 - March 12, 2024 uptrend has proven too strong. Ethereum is currently hovering a tad above the August 5 low of $2,181 with the next key support levels being the January 24, 2022 low and 78.6% Fibonacci retracement at $2,158 and $2,081 respectively.