On Thursday, investors struggled with resurgent fears about the U.S. economy, which put pressure on cryptocurrencies.
At its most recent price of $27,901.60, Bitcoin was down approximately 4%, according to Coin Metrics. After the minutes of the Federal Reserve’s July policy meeting were made public on Wednesday, the slide started. It dropped to $27,858.94 earlier on Thursday, its lowest point since June 20.
The lowest point in the past two years
The minutes issued a warning that the Fed sees “upside risks” to inflation that may possibly result in additional rate hikes. The Fed increased its benchmark interest rate at that meeting to the highest level in more than 22 years. Markets have been placing bets that the central bank won’t change interest rates any further this year.
According to Coin Metrics, the correlation between Bitcoin and stocks is at its lowest point in the past two years. However, in 2022, as a result of the Fed’s campaign to control inflation by raising interest rates, it reached an all-time high.
According to Sylvia Jablonski, chief investment officer of Defiance ETFs, “Although inflation in and of itself could be a case for the growth of 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.”
Bitcoin sinks below $28K as crypto-tied stocks fall into the red: Thursday August 17, 2023
Prices in this tight range
“My suspicion is that the higher beta equities and cryptocurrency 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,” Jablonski said.
According to Kaiko, the 90-day volatility of bitcoin and ether fell this week to multiyear lows of 35% and 37%, respectively.
Bitcoin’s return to $30,000 in late June, according to Needham’s John Todaro, “had been on light volume so that rally has not had a tonne of strength.” One of the main positive catalysts for cryptocurrency, the eventual launch of a spot bitcoin ETF, also lost some speed this week, he continued.
“Bitcoin and crypto generally are pulling back,” he said on CNBC, “with a U.S. [spot bitcoin] ETF likely not seeing a near-term decision given the setback this week as well as expectations for higher rates for longer.” “Halving expectations in Q1-Q2 of 24 and any ongoing SEC comments regarding ETFs” are the two remaining drivers.
