Cryptocurrencies faced downward pressure on Thursday as investors grappled with renewed concerns about the U.S. economy. According to Coin Metrics, Bitcoin’s price dipped around 4% to $27,901.60 following the release of the minutes from the Federal Reserve’s July policy meeting. The minutes highlighted potential “upside risks” to inflation, which could result in more interest rate hikes. This announcement caused the stock market to decline for the second consecutive day and pushed the 10-year U.S. Treasury yield to its highest close since 2008.
In terms of its correlation with stocks, Bitcoin is currently at its lowest level in two years, as reported by Coin Metrics. However, in 2022, it reached an all-time high due to the Federal Reserve’s efforts to curb inflation through rate hikes. Sylvia Jablonski, the Chief Investment Officer at Defiance ETFs, noted that while inflation could theoretically drive growth in crypto assets, it could also deter risk-averse investors who perceive Bitcoin and similar assets as risky. She attributed the recent stagnation and narrow trading range to the typical end-of-summer slowdown and low trading volume, exacerbated by the hawkish stance of the Federal Reserve.
Furthermore, Bitcoin and Ether experienced multiyear lows in volatility this week, with rates of 35% and 37%, respectively, according to Kaiko. John Todaro, an analyst at Needham, pointed out that Bitcoin’s rally to $30,000 in late June lacked substantial volume, weakening its momentum. Additionally, the anticipation surrounding the introduction of a spot Bitcoin ETF lost some momentum this week, likely due to regulatory setbacks and expectations of prolonged higher interest rates. Todaro highlighted the Halving expectations in Q1-Q2 ’24 and ongoing comments from the SEC regarding ETFs as potential catalysts for future market movements.
On Thursday, several top crypto assets, including BNB coin from Binance, XRP from Ripple, Solana, and Polygon, experienced declines of more than 3%. Ether also fell by 4%.
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