Bitcoin barely fluctuates according to CPI. But cryptos still feel regulatory pressure.
Bitcoin
and other cryptocurrencies edged higher on Tuesday but remained below recent levels as regulatory uncertainty weighed on prices. Cryptos barely budged as US inflation continued to cool.
The price of Bitcoin has risen less than 1% in the past 24 hours to near $21,700, still below the zone around $23,000 that had marked the digital asset’s biggest trading range for weeks until a selloff last week. Bitcoin is now at its lowest level since mid-January after paring gains from a rally that had seen prices jump 40% since the start of the year.
New regulatory uncertainties have emerged as the latest threat to crypto, with the Securities and Exchange Commission targeting several crypto exchanges and companies across the industry. Products and services in the digital asset ecosystem — including stakes, which are essential to the Ethereum blockchain, and stablecoins tied to the dollar — have been scrutinized and appear vulnerable.
“Crypto is weakening as all traders worry about how devastating this SEC wave will be with the breakdown of staking products and stablecoins,” said Edward Moya, analyst at broker Oanda. “The news flow has been quite bearish for crypto.”
Traders are grappling with ongoing regulatory developments with key macro data doing little to change the picture. Analysts had expected the cryptos to move on the back of the Consumer Price Index for January which was on Tuesday. A tough macro backdrop of high inflation and rising interest rates has made crypto and stocks closely correlated, but Bitcoin barely budged from inflationary pressures, fluctuating like the Dow Jones Industrial Average and the S&P 500.
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Investors wanted to see inflation continue to trend downward, easing pressure from the Federal Reserve as the central bank battles the hottest rate hikes in decades. The Fed aggressively tightened financial conditions over the past year in an effort to curb inflation, which was the driving force behind the 2022 market sell-off. CPI rose 6.4% in January, slightly above economists’ expectations in a release that was somewhat mixed, but still down from 6.5% in December.
“Bitcoin is still above the $20,000 level. It may be difficult for buyers to emerge until we see how Wall Street reacts with [Tuesday’s] inflation data,” said Oandas Moya. It’s possible that as Tuesday trading gets into full swing in New York, investor sentiment could shift more sharply as traders digest the data.
“There happens to be some yo-yoing within a tight range after the data release, but no obvious catalysts for Bitcoin to regain $23,000 or dip back towards $20,000 yet. The market will continue for now,” said Michael Safai, managing partner at crypto fund Dexterity Capital .” It may well be that inflation data and Fed meetings will not have the same push-pull effect on crypto prices as they did in 2022, as regulation quickly becomes the biggest influence on sentiment.”
Beyond Bitcoin,
Ether
— the second largest crypto — gained 2% to over $1,500. Smaller cryptos or altcoins were also stronger, too
Cardano
and
Polygon
both up 3%. Memecoins were a bit more muted, too
Dogecoin
and
Shiba Inu
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each up 1%. Binance Coin, the token issued by crypto exchange Binance – which has come under pressure from regulatory headwinds – was up less than 1% after falling as much as 9% on Monday.
Write to Jack Denton at [email protected]
