Bitcoin and other cryptos are falling. It’s not all because of Binance.
Bitcoin
and other cryptocurrencies fell on Tuesday as sentiment among digital asset traders became more cautious following news that Binance, by far the world’s largest crypto exchange, is being sued by US regulators. However, that is not the only reason for the decline.
The price of Bitcoin has fallen 3% in the past 24 hours to $27,000, the lowest consistent price for the biggest crypto in nearly two weeks, as the latest rally gathered momentum and brought prices to around $28,500, the highest level since June last year.
“The decline was triggered by the CFTC’s surprise lawsuit against Binance,” said Alex Kuptsikevich, an analyst at broker FxPro. “Investors should ask themselves again: Is my money safe? If banks are a risk, crypto exchanges are an even bigger risk.”
In fact, the Commodity Futures Trading Commission on Tuesday sued Binance and its co-founder and CEO, Changpeng Zhao, alleging they violated rules that require futures and other derivatives to be traded on regulated platforms.
But that may not be the only factor driving prices down in the short term. MicroStrategy (ticker: MSTR), a software company led by high-profile Bitcoin bull Michael Saylor that owns significant amounts of digital assets, revealed on Monday that it had bought a new tranche of Bitcoin-6455 coins for about $150 million.
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“A negative market reaction following MicroStrategy acquisition announcements is typical, with Bitcoin averaging -2.2% on MicroStrategy announcement days. The average 7-day return is more balanced at -0.2%,” wrote analysts at market research group K33 Research in a note.
The changing outlook around interest rates means that Bitcoin continues to be sensitive to macroeconomic forces and movements in the
Dow Jones Industrial Average
and
S&P 500,
since higher rates dampen demand for risk-sensitive assets. While traders will likely have to wait until Friday for the next big macro catalyst, economic data covering trade, inventories and consumer confidence will be released on Tuesday, with public comments from a Federal Reserve official also on the docket.
Beyond Bitcoin,
Ether
—the second largest crypto lost 1.5% to $1,730. Smaller cryptos or altcoins were also lower, with
Cardano
down 1% and
Polygon
fall 2.5%. BNB, the native token of the Binance exchange, fell 5%. Memecoins were also weaker, with
Dogecoin
and
Shiba Inu
each departure 1.5%.
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Write to Jack Denton at [email protected]
