Bitcoin’s store of value status questioned as analysts share mixed opinions

Bitcoin’s status as a store of value is being “decimated”, according to Kathleen Breitman, co-founder of the Tezos blockchain.

Breitman’s comments came as the broader crypto market responded to growing fears of an economic recession catapulted by Japan’s stock market crash.

During her appearance on CNBC’s ‘Squawk Box’ on Aug. 5, Breitman labeled Bitcoin as “internet pretend money,” which is largely considered a speculative asset. 

According to her, whenever traders “get a sense of something that looks like a recession,” their first reaction is to sell assets of this sort.

This is why Breittmant says she hasn’t “bought into” the store of value narrative. Instead, she believes Bitcoin’s utility will grow as a core asset and a new means of exchanging value.

Gold, often compared to Bitcoin, remained relatively stable and even surpassed the $2500 mark for the first time.

Several factors are in play

Bitcoin momentarily dropped below $50,000 as the US unemployment rate jumped over 4.3% per data released on August 2. The situation escalated further as Japan unexpectedly raised interest rates, directly impacting carry trade strategies in  U.S. markets.

Carry trading is a common strategy among forex traders and fund managers. It involves borrowing funds in low-interest currencies like the Japanese yen and swapping them for high-interest currencies like the US dollar. As a result, traders can profit from the difference in interest rates between two currencies.

The high-interest currencies are then invested in stocks and bonds.

However, with the Bank of Japan raising its interest rates, traders who had borrowed yen started closing their positions due to the higher borrowing costs now in play. The effect was felt by the Nikkei 225 stock index, which plunged close to 14%, as investors started offloading their positions to repay the debts.

Other factors adding downward pressure on Bitcoin and the broader crypto market were growing political tensions in the Middle East between Iran and Israel. Meanwhile, massive liquidations from market maker Jump Crypto over the past week did not help Bitcoin’s case either.

The overall cryptocurrency market cap dropped as low as $1.81 trillion, recording a more than 15% drop in 24 hours. Derivatives traders took a massive hit, recording over $1.2 billion in liquidations during the same time frame.

Varied opinions prevail

Cryptocurrency analysts have expressed mixed opinions regarding the direction of Bitcoin from its current position.

According to crypto analyst Rekt Capital, Bitcoin is expected to experience a further downturn. He cited historical data, pointing out that Bitcoin was nearing a post-halving breakout point, which is typically observed 150-160 days following the halving.

Until then, the analyst sees “scope” for additional “downside deviation” in the short term.

Crypto analyst Moon highlighted the $51,000 mark as a crucial point to keep an eye on. If Bitcoin fails to hold above this support region, he expects a downward rally towards the $45,000 mark.

At the time of writing Bitcoin had recovered to $54,687 but was down 7.8% over the past 24 hours. The psychological support level at $50,000 seems to be holding strong.

Amid this backdrop, crypto analyst Satoshi Flipper said Bitcoin has initiated a “V shape” recovery, which is a pattern that forms when an asset quickly recovers after a massive downturn.

The analyst previously pointed to a bull flag pattern on the BTC chart that, according to him, had been forming for seven months. Bull flags are formed during periods of consolidation and are typically followed by a breakout.

Crypto analyst Elija also spotted a similar pattern on the Bitcoin monthly chart, speculating that the flagship crypto will witness a “breakout pump.”

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