It was a shortened holiday week due to the Labor Day bank holiday in the U.S., but traders returning from their summer vacations wasted no time in selling off bitcoin steadily throughout the week. After opening the futures market slightly below $60,000, bitcoin made a brief attempt to reclaim the $60,000 level during Tuesday’s early Asian session but was ultimately rejected. By the end of the day, it had fallen over $3,000 from its highs, closing around $57,000.

Prices remained in the mid-to-upper $50,000s until Friday when the monthly non-farm payrolls (NFP) data was released. The report showed weaker-than-expected job growth, raising concerns about the labor market.

As U.S. markets opened, bitcoin initially attempted a rally toward $57,000 but quickly lost momentum, plunging to new one-month lows below $55,000. The looming uncertainty around the Federal Reserve’s upcoming interest rate decision added further selling pressure, with a stronger U.S. dollar compounding the bearish sentiment.

This combination of macroeconomic concerns contributed to a short-term downtrend, culminating in a 12% decline from the intraday weekly high of $60,185 to the closing price of $53,695 on Friday.

Fear & Greed Index Near Yearly Lows

Bitcoin’s recent downward movement aligns with the Fear and Greed Index hovering around 25, signaling a near-extreme fear environment. This mirrors the sentiment seen a month ago when bitcoin briefly dipped below $50,000. The index, which reflects market sentiment by tracking factors such as volatility and social sentiment, is a key gauge of investor psychology.

Historically, high fear readings often coincide with points where downward momentum slows, potentially setting the stage for reversals to the upside.

While sentiment remains bearish, the low Fear and Greed Index suggests that the market could be nearing a critical juncture where negative sentiment might ease, potentially paving the way for a recovery in bitcoin’s price.

Spot ETF Flows Face Eight Straight Days Of Outflows

Bitcoin spot ETFs have seen significant outflows, with eight consecutive days of withdrawals marking a record for the year. Tuesday recorded the largest single-day outflow, with nearly $300 million in net outflows, primarily driven by Fidelity’s FBTC fund, which saw over $162 million on Tuesday and nearly $150 million on Friday.

As a result, total net assets across all major spot ETFs have declined to $48.24 billion — a 23% decrease from the peak of $62.56 billion in early June.

Bitcoin September Seasonality

According to Coinglass data, September is historically a negative month for bitcoin, with an average return of -4.97% and a median of -6.3%. With bitcoin already down 8% in the first week of September, historical trends suggest a challenging month ahead, with the potential for further downside pressure.

Bitcoin Aggregated Funding Rates

With the recent drop to the $53,000 level, funding rates for bitcoin perpetual futures contracts have turned negative, reaching levels last seen during the early August dip below $50,000, which marked a bottom for that month.

Negative funding rates indicate that short positions are paying long positions, suggesting an overcrowded short trade as most traders bet against bitcoin. However, these negative rates can be bullish for bitcoin, as they often signal potential for a short squeeze. If prices start to rise, short sellers may be forced to close their positions, accelerating upward momentum.

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