Cryptocurrencies remained under pressure on Thursday amid renewed concerns about the inflation in the US economy and changing market sentiments.
According to Coin Metrics, the largest and most renowned cryptocurrency, Bitcoin, dipped by more than 2% to $28,300. The prices were seen sliding immediately after announcing the Federal Reserve’s July policy meeting minutes. Bitcoin was seen at its lowest level since late June of $28,335.42 later on Wednesday.
Several other top cryptocurrencies by their market capitalization, including ether, Ripple’s XRP, Binance’s BNB coin, Poligin, and the Solana coins, were lower by more than 1% on Thursday.
The Central Bank meeting minutes revealed that there is a serious concern among the policymakers regarding the US economy and cautioned that Fed officials are predicting an “upside risk” to inflation that could potentially lead to even more interest rate hikes.
At the same meeting, the Fed had raised its benchmark interest rates to the highest levels seen 22 years before. Looking at this action, the market has been betting against any further rate hikes by the Fed until the end of this year. Similarly, stock markets have fallen for a second consecutive day on Wednesday, and the 10-year US treasury yield has been the highest since 2008.
According to Coin Metrics, currently, Bitcoin’s correlation with the stock market is at its two-year low; However, last year it shot to an all-time high as a consequence of the Fed’s interest rate hiking campaign to control inflation.
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Cryptocurrency in the upcoming weeks
Sylvia Jablonski, chief investment officer at Defiance ETFs, said: “Although inflation in itself could be an argument for growth in crypto assets, with inflation comes other aspects like risk-off appetite from investors fearing a recession, and avoiding what bitcoin is deemed to be riskier assets,”
Further adding to his concerns over the current situation in upcoming days, he said that: “I suspect that the higher beta equities and crypto are the victims of the end of summer lag, range-bound trading, no volume, which is typical in August – with the hawkish Fed as the cherry on top to keep investors to the side and prices in this tight range.”
As reported by Kaiko, we have seen that the market has been witnessing an all-time low 90-day volatility in the prices of Bitcoin and Ether at 35% and 37%, respectively, this week.
John Todaro, an investment analyst at Needham, added that Bitcoin’s move towards $30,000 in late June had very little volume and couldn’t gather the investors’ support, which didn’t produce the desired results. He also discussed how the debut of a spot Bitcoin ETF lost its steam this week, which was seen as a major catalyst in cryptocurrency.
He further added that “with the U.S. spot bitcoin ETF might likely not see a near term decision given the setback this week as well as market expectations for higher rates for longer, bitcoin and crypto broadly are pulling back, and Remaining catalysts are cutting expectations to half in Q1-Q2 ’24 and any on-going ETF related comments from the SEC.”
