Bitcoin Tie. What its reaction to the OPEC cut says about crypto’s next move.
Bitcoin
and other cryptocurrencies edged lower on Monday but held close to recent highs. The reaction in cryptocurrencies to the dramatic production cut by the OPEC+ group of oil-producing nations provides important clues about the next move in digital assets.
The price of Bitcoin has fallen less than 1% over the past 24 hours, changing hands around $28,350. At levels above $28,000 – excluding the recent peak near $29,500 – the largest digital asset is trading around its highest level since June in last year, when the crypto crash accelerated. It has risen more than 70% so far this year in a bullish swing.
Driving cryptos higher has been an expectation that easing inflation and stress on banks will push the Federal Reserve to be more accommodative on monetary policy, moderate rate hikes and possibly even cut rates this year. Decades of high inflation prompted the Fed to raise interest rates over the past year, putting a pronounced squeeze on risk-sensitive assets like crypto and stocks, which has seen Bitcoin become more closely linked to
Dow Jones Industrial Average
and
S&P 500.
This correlation with stocks and broader risk sentiment has dominated price action in crypto despite intense regulatory headwinds facing digital assets in the US and abroad. The latest move shows no sign of this trend going away.
As news broke Sunday that the OPEC+ group of oil-producing nations would cut crude oil production by a combined more than 1 million barrels per day, Bitcoin quickly fell from $28,150 to a low near $27,600, its lowest level in five days. That mirrored a move in futures contracts that track tech-heavy stocks
Nasdaq 100,
the index of stocks that crypto has proven to be most correlated with, as digital assets and technology stocks are among the most risk-sensitive asset classes.
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The pressure on cryptos as a result of the OPEC+ move comes amid soaring oil prices, which threaten to add to inflationary pressures and could lead to more aggressive Fed action. That would be bad for Bitcoin.
It only highlights how dominant the macro-economic picture and the attachment to the stock market is for cryptos, and sets the stage for the end of the week, when the main US jobs report for March will be released. Until then, barring major unforeseen regulatory shocks, investors can expect digital assets to continue to fluctuate in line with stocks, amid moves in broader risk sentiment.
Beyond Bitcoin,
Ether
— the second-largest crypto — fell close to 1% and held above $1,800. Smaller cryptos or altcoins were more mixed, too
Cardano
however up 3%
Polygon
was below flat. Memecoins were further in the red, with
Dogecoin
down 5% and
Shiba Inu
drop 3%.
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Write to Jack Denton at [email protected]
