The cryptocurrency market remains highly volatile following a significant price drop, with new data suggesting that economic factors might continue to impact it. A report by 10x Research indicates that U.S. consumer borrowing has slowed, which could have a direct effect on the crypto market’s stability.
The Federal Reserve’s recent data shows an increase in total outstanding credit to $8.9 billion in June, but a decrease in revolving debts like credit card debt by $1.7 billion, marking the lowest level since early 2021. Conversely, non-revolving debts, such as student loans and auto loans, have risen to $10.6 billion, reflecting a complex economic situation.
10x Research expresses concern over the U.S. economy’s outlook, particularly how it might negatively influence Bitcoin and the broader crypto market. The report highlights an alarming rise in credit defaults, with a 10.93% increase in the second quarter of 2024, and auto-loan defaults reaching record highs since 2012.
The drop in consumer credit from $11.3 billion to $8.9 billion, below the expected $10 billion, indicates that U.S. consumers may be reaching their borrowing limits. This decline in consumer financial health is worrying, especially as it could reduce the fiat-to-crypto transactions critical to the market.
Markus Thielen, founder of 10x Research, underscores the significance of these weak consumer credit figures, particularly their potential impact on the crypto market. He also mentions concerns about the upcoming U.S. elections and the sluggish U.S. economy, both of which could further destabilize the market.
Additionally, the waning interest in artificial intelligence (AI), which is closely linked to the crypto industry, poses another risk. The current Crypto Fear and Greed Index reflects extreme fear among traders, with a value of 20, indicating widespread hesitation and uncertainty.
In a recent update, 10x Research revealed that many investors had sold their Bitcoin (BTC) when its price was between $64,000 and $68,000. The firm had anticipated a price break from the $60,000-$70,000 range but has yet to establish a new lower range.
The analysts emphasize the need for caution in the current market environment, noting significant outflows from BTC Spot ETFs instead of buying the dip. The lack of buyers during this recent price decline has raised concerns about the market’s future direction, with Bitcoin struggling to recover after hitting resistance at $56,000-$57,000.
Despite the current market volatility and concerns about further declines, some analysts remain optimistic about Bitcoin’s near-term prospects. Ali Martinez, for example, believes that Bitcoin is forming a bull pennant on lower timeframes, suggesting a possible 5% rally to $60,000.
However, 10x Research advises investors to remain cautious, considering Bitcoin’s vulnerability since mid-March and the uncertain macroeconomic conditions that continue to influence the crypto market.
