Markets
Bitcoin plunges 3.7% to $66,870; here’s why it falls
Bitcoin, the world’s largest cryptocurrency, fell 3.78% to $66,817 on Tuesday, reflecting traders’ anxiety ahead of the release of US inflation data and the Reserve’s monetary policy decision federal.
Bitcoin hit a record high of $73,798 in March, boosted by inflows into dedicated US exchange-traded funds. Since then, however, it has struggled to reach new heights. 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 cryptocurrency.
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“A recent string of labor market numbers beating expectations has cast doubt on whether the Federal Reserve is likely to cut interest rates in the near future. This change in sentiment dampened risk appetite, which negatively impacted cryptocurrencies. Bitcoin’s attempt to climb above $72,000 failed, falling back below $70,000, failing to accelerate despite breaking downside 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 jobs report found that 272,000 jobs were created in May, well above forecasts 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 sustained higher interest rates has put pressure on Bitcoin, causing it to fall sharply from its two-month high.
“In addition, there have been significant outflows from US-listed Bitcoin exchange-traded funds (ETFs). ETFs saw a cumulative outflow of more than $64 million, contributing to the downward pressure on prices. Regulatory uncertainty following the European Parliament elections has increased pressure on the price of Bitcoin. The election results will influence the implementation of the MiCA (Markets in Crypto Assets) regulation and shape EU crypto policy,” said Balaji Srihari, Head of Business at CoinSwitch.
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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 uncertainties regarding upcoming events and their potential economic impact. Despite the slowdown, institutional interest in cryptocurrencies remains robust, as evidenced by consistent inflows into Bitcoin spot ETFs, with 19 consecutive days of net inflows through June 10,” Menon added.
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According to Minal Thukral, head of growth and strategy at CoinDCX, traders and investors are following a more conservative and cautious approach at the moment and perhaps making profits in the short term.
On the other hand, CoinSwitch’s Srihari expects continued volatility in the crypto market over the coming weeks, given significant developments in the global market.
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