Bitcoin
Bitcoin Prices Approach $65,000 and Hit Lowest Level Since Mid-May
Bitcoin prices have fallen to almost $65,000 today. (Photo illustration by Chesnot/Getty Images)
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Bitcoin prices retreated today, falling to their lowest level in nearly a month as several factors combined to fuel its latest declines.
The world’s most prominent digital currency fell to $65,005 this afternoon, according to Coinbase data sourced from TradingView. At this point, the cryptocurrency had been trading since at least mid-May.
When asked to explain this latest price development, analysts highlighted several factors, ranging from recent decisions by the Federal Open Market Committee to developments in futures markets.
The Fed’s Potential “Policy Mistake”
The FOMC may have erred earlier this week when it opted to leave the target range for the federal funds rate unchanged and predicted it would cut the rate just once in 2024, according to one market watcher.
“There is a strong emerging narrative of ‘did the Fed make a policy mistake’ as on Wednesday they kept rates at recent highs and postponed projected cuts for the rest of the year, just as several indicators of inflation and economic growth. to light,” Seth Ginns, managing partner and head of net investments at CoinFundstated through comments sent via email.
Independent analyst Armando Aguilar also weighed in on this matter, explaining how this has affected sentiment around bitcoin and the broader digital currency markets.
“The FED leaving rates unchanged at 5.25-5.50% and anticipating fewer rate cuts this year has dampened hopes of BTC rising toward new ATH levels,” he said via email.
“Instead, rising fears of high interest rates have contributed to fewer capital flows into crypto investment products,” Aguilar added.
“Going from three rate cuts to potentially just one, traders have weighed in on expectations about expected rate cuts weighing on assets like cryptocurrencies.”
Impact of the FOMC on real yields
Ginns elaborated on how the Fed’s recent decisions could impact real yields, which are yields adjusted for inflation.
“Bitcoin
Bitcoin
it has a strong inverse correlation with real income”, he emphasized.
“So if the Fed holds rates and inflation is slowing, real yields will rise, which is bad for bitcoin,” Ginns pointed out.
“The Fed has made it very clear that it does not want real yields to rise, so we expect it to become more dovish in public appearances in the coming weeks if we see continued data on weaker inflation.”
Crypto Futures Market
Several analysts have commented on how recent changes in futures positions have affected both bitcoin and crypto markets in general.
“Open interest data on cryptocurrency exchanges shows large accumulation of long positions after ETH
Ethereum
Approval of ETF Spot”, Julio Moreno, head of research at CriptoQuantsaid via Telegram.
However, “a few days ago, prices started to fall due to profit taking, and then an influx of new short positions fueled today’s decline.”
Greg Magadini, Director of Derivatives at Digital Asset Data Provider Amberdataalso offered his opinion on the matter.
“Following the positive ETH ETF sentiment, we saw a large increase in crypto futures open interest, but since then the macro environment has become more aggressive due to strong employment and the recent FOMC rate decision and press conference” , he said in an email.
“The market is now only looking for a rate cut in 2024. This, combined with the realization that recent Bitcoin ETF inflows may be due to ‘basis trading’ rather than direct Bitcoin investments, we are seeing headwinds for higher prices,” said Magadini.
He elaborated, indicating via Telegram that “the macro environment has turned aggressive and people who bought futures on the SEC ETF decision are now stuck as sellers.”
“Furthermore, inflows into the BTC ETF are not as directly bullish as initially assumed, since it appears that many of these inflows are paired with short CME futures,” Magadini added.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and SOL.