Bitcoin’s price is falling. Regulatory fears remain in focus.
Bitcoin
and other cryptocurrencies fell on Monday as regulatory pressure continued to weigh on digital asset prices. But Tuesday could see a different kind of surprise for crypto, with key macroeconomic data likely to be the next big catalyst for markets.
The price of Bitcoin has fallen 1.5% in the past 24 hours to $21,550. After gaining 40% this year in a rally that has renewed the crypto markets, the biggest digital asset has fallen back since last week, now changed hands below the trading range near $23,000 that had previously dominated for several weeks. Bitcoin began its latest decline late last week as fears of a US regulatory crackdown mounted.
The Securities and Exchange Commission announced last Thursday that Kraken settled allegations over the crypto exchange’s “staking” service, agreeing to stop the service and pay a $30 million fine. Staking is essential to Ethereum and other blockchains—a process that helps networks operate and allows token holders to earn money—and is also a major source of revenue for exchanges.
The last headwind came on Monday. US crypto group Paxos said it would end its relationship with Binance, the world’s largest crypto exchange, and stop issuing the Binance USD stablecoin following an order from the New York Department of Financial Services. Stablecoins play a crucial role in crypto markets, giving investors a boost to the digital asset universe and acting as a key source of liquidity. The BUSD stablecoin is the third largest, after Tether and USD Coin, with a market capitalization of more than $16 billion.
“Stablecoins have become crypto’s mainstay of liquidity in recent years, and BUSD is the third largest by market capitalization and third most traded token,” said Yuya Hasegawa, analyst at crypto exchange Bitbank. “Needless to say, the threat to BUSD has the potential to change the stablecoin landscape and users’ trading activity.”
Advertisement – Scroll to continue
While regulatory developments will be key for crypto prices, likely more influential on short-term movements will be US Consumer Price Index (CPI) data due on Tuesday. Bitcoin and its peers are still highly correlated to stocks, and fluctuate along with
Dow Jones Industrial Average
and
S&P 500
as both asset classes continue to be sensitive to macro developments on inflation, interest rate and recession risks.
As traders continue to shift expectations for rate hikes by the Federal Reserve, inflation data on Tuesday will be in sharp focus.
“Bitcoin faces another test this week: January US CPI,” said Bitbank’s Hasegawa. “Bitcoin is still under a downside risk and it could go as low as the psychological level of $20,000 in the short term. Of course, if the CPI continues to decline in January, the price could recover some of the loss from last week, but it would be wise to wait and see the data.”
Beyond Bitcoin,
Ether
— the second largest crypto — fell 4% to $1,475. Smaller cryptos or altcoins were even weaker, with
Cardano
crumbling 5% and
Polygon
plunges 10%. Memecoins were also in the red, with
Dogecoin
down 4% and
Shiba Inu
Advertisement – Scroll to continue
drop 5%.
Write to Jack Denton at [email protected]
