Bitcoin price falls due to interest rate concerns. The characters are still flashing.
Bitcoin
and other cryptocurrencies fell on Wednesday, in line with the stock market as digital assets continued to be sensitive to macroeconomic forces. But bullish signals still suggested that cryptos are in a positive groove.
The price of Bitcoin has fallen 2% in the past 24 hours to $29,100, falling below the psychologically important $30,000 mark – which represents where prices stood last June, before the crypto selloff accelerated into a brutal bear market. The biggest digital asset passed $30,000 last week, rising to nearly $31,000 on points, but has struggled to consolidate gains or move higher amid some signs of profit-taking.
“The sudden selloff removes some of the excess froth in the market,” said Antoni Trenchev, co-founder and managing partner at crypto lender Nexo.
Pushing prices down in the near term were broader concerns over inflation and the prospect of more rate hikes, which also weighed on
Dow Jones Industrial Average
and
S&P 500.
A series of dramatic interest rate hikes by the Federal Reserve last year – an attempt to curb decades of high inflation – drastically dampened demand for risk-sensitive assets, knocking down both crypto and stocks. While Bitcoin’s rally this year has come amid expectations of easier monetary policy from the Fed, the narrative remains vulnerable.
“Bitcoin’s resilience in the face of sell-side pressure has been impressive in recent months, so this will tell us if the bulls have anything left in the tank after pushing Bitcoin as high as $31,000 last week,” Trenchev said. “Macro and regulatory distractions remain and won’t be easily shrugged off … Bitcoin spent three weeks bouncing around $28,000, so don’t be surprised to see a bounce back to that range.”
Among the latest catalysts to shake investor confidence in the prospect of looser monetary policy were comments from St. Louis Federal Reserve President James Bullard, who called for higher interest rates again on Tuesday. Glowing inflation data from the UK on Wednesday has also led to global hackles over persistent price rises.
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“Concerns that interest rates will continue to rise in the US are permeating financial markets with investors concerned that further tightening will increase the chances of recession and cause ripple effects around the world,” said Susannah Streeter, analyst at broker Hargreaves Lansdown
.
But more broadly, there are still more bullish signs for Bitcoin, which has already risen around 80% so far this year in a surge from the depths of its “crypto-winter”, spurring a new bull market for digital assets. Bitcoin recently finished its best quarterly return since its all-time high in late 2021.
“The strong market performance in 2023 is a stark contrast to 2022, and suggests a favorable regime shift is underway,” analysts at crypto market intelligence firm Glassnode wrote in a recent note.
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“Several indicators on the chain suggest that bear market conditions (or at least the worst) may now be behind us,” the Glassnode analysts wrote, citing blockchain network data covering individual Bitcoin trades closely scrutinized by analysts because it was “surprisingly consistent .”
Bitcoin is in “neutral territory”, according to Glassnode, holding above the zone between $16,000 and $25,000 where significant Bitcoin volume has changed hands. “We note that much of this supply remains tightly held by these buyers, while profits are being taken, and network utilization is improving, all of which supports the strong market performance,” the analysts wrote.
Beyond Bitcoin,
Ether
— the second-largest crypto, which has outperformed since the Ethereum blockchain completed a critical upgrade last week — fell another 5% below the key $2,000 level. Smaller cryptos, or altcoins, were also weak, too
Cardano
and
Polygon
down 6% each. Memecoins were unspared, like
Dogecoin
and
Shiba Inu
both shed 6%.
Write to Jack Denton at [email protected]
