Bitcoin
Bitcoin plummets 3.7% to $66,870; here’s why it’s falling
The world’s largest cryptocurrency, Bitcoin, fell 3.78% to $66,817 on Tuesday, reflecting investor anxiety ahead of the release of US inflation data and the Federal Reserve’s monetary policy decision.
Bitcoin hit a record high of $73,798 in March, driven by inflows into dedicated U.S. exchange-traded funds. However, it has struggled to reach new highs since then. Upcoming inflation data and the Federal Reserve’s outlook on Wednesday could reinforce concerns that interest rates will remain high for an extended period, creating a challenging environment for speculative assets like cryptocurrencies.
Read too: Ether gets ETF approval from US regulator; experts predict volatility ahead
“A recent set of labor market numbers that exceeded expectations has cast doubt on the likelihood of the Federal Reserve cutting interest rates anytime soon. This change in sentiment has reduced risk appetite, negatively impacting cryptocurrencies. Bitcoin’s attempt to rise above US$72,000 failed, retreating below US$70,000 without accelerating, despite breaking downward resistance. Meanwhile, selling pressure remains subdued, indicating a buying-inclined market,” said Rajagopal Menon, Vice President, WazirX.
In addition to US inflation and the Fed’s outlook, the strong US employment report revealed that 272,000 jobs were created in May, significantly exceeding the forecast of 185,000. This strong jobs report, coupled with higher-than-expected wage growth, led to a sell-off in stock market futures and a rise in Treasury yields. The prospect of higher and sustained interest rates has put pressure on Bitcoin, causing it to fall sharply from a two-month high.
“Additionally, there have been significant outflows from US-listed spot bitcoin exchange-traded funds (ETFs). ETFs recorded an accumulated outflow of more than $64 million, contributing to downward pressure on the price. Regulatory uncertainty following the European Parliament elections has increased pressure on the price of Bitcoin. The election results will influence the implementation of MiCA (Markets in Cryptoassets) regulations and shape EU policy towards crypto,” said Balaji Srihari, head of business at CoinSwitch.
Read too: SEC Expands Accessibility to Crypto Investing with Approval of ETFs for Ether
Where are bitcoin prices going?
Experts believe that bearish sentiment and demand for crypto will remain robust in the near term.
“The bearish market sentiment stems from uncertainty about upcoming events and their potential economic impact. Despite the recession, institutional interest in cryptocurrencies remains robust, as seen by the consistent inflows into Bitcoin spot ETFs, with 19 consecutive days of net inflows as of June 10,” Menon added.
Read too: SEBI recommends regulators oversee crypto trading, RBI still sees ‘macro risk’
According to Minal Thukral, Head of Growth and Strategy at CoinDCX, traders and investors are following a more conservative and cautious approach for now and perhaps booking short-term profits.
On the other hand, CoinSwitch’s Srihari expects continued volatility in the crypto market in the coming weeks, given significant developments in the global market.
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Published: June 11, 2024, 9:32 pm IST
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