Bitcoin slips as stocks fall deeper into bear market
Bitcoin continues to trade in a tight $18,000 to $25,000 range, keeping investors informed of where the price is headed next. The Crytpo market has been plagued with a number of problems from collapsed projects to bankruptcies.
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Bitcoin topped $20,000 on Tuesday, hitting its highest level in more than a week, but is still struggling to break out of the tight trading range.
However, the world’s largest cryptocurrency by market capitalization was lower as shares fell deeper into a bear market. It was last down less than 1% at $19,078.21, according to data from Coin Metrics. Ether was also down by less than 1%.
Bitcoin continues to struggle for direction. It has traded between $18,000 and $25,000 since mid-June after a crash saw nearly $2 trillion wiped out from the entire crypto market since its peak in November.
This market decline was fueled by interest rate hikes by central banks aimed at controlling rampant inflation as well as a wave of bankruptcies and insolvency issues filtering through the crypto industry.
Crypto investors have been watching monetary policy because digital currencies have been closely correlated to US stock markets this year. Higher interest rates have put pressure on S&P 500 and technology-heavy Nasdaqwhich has filtered through other risky assets including cryptocurrencies.
The US Federal Reserve’s 0.75 percentage point interest rate hike last week marked a “major event” for crypto markets, according to Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno.
“This was broadly in line with market expectations and so we’ve seen a lot of that sentiment priced in,” Ayyar said.
Interestingly, bitcoin’s rally, which began on Monday, occurred despite a fall in US stocks with the S&P 500 closing at its lowest level in 2022. Stock futures rose on Tuesday. So there are signs that perhaps the correlation between crypto and stocks may weaken.
Meanwhile, investors are keeping a close eye on the US dollar. The dollar index, which tracks the dollar against a basket of currencies, is up more than 18% this year. Bitcoin moves inversely to the dollar, so a strong dollar is negative for bitcoin. However, Ayyar said the dollar index could be nearing a top, which would mark a potential bottom for bitcoin. That could be a reason behind bitcoin’s rise.
“Traders can therefore also position themselves accordingly,” said Ayyar.
