Markets
Why the crypto market is down 20% and Bitcoin is down 5% this week
Last week, the cryptocurrency market saw a significant slowdown, with overall valuations down 20% and Bitcoin of 5%.
This shift occurred against a backdrop of macroeconomic data and global financial indicators contributing to bearish sentiment.
Crypto Market Reaction to Macroeconomic Indicators
Cryptocurrency analyst Michael van de Poppe explained the situation occurring in the market and said that despite the 20% drop in total market capitalization, the situation in the market is not as bad as ‘she seems so. As van de Poppe pointed out, this correction could form a “higher low,” meaning the overall uptrend is still intact.
A “higher low” is a bullish signal that indicates the market could regain momentum even after a retracement. This trend may indicate that investors are still optimistic about the future, buying into the market at these lower prices in anticipation of future gains.
Recent data releases, which have provided a rather mixed picture of the economic environment, have been cited to explain this market trend. The consumer price index (CPI), a key indicator used by the Federal Reserve in setting policy, rose 3.3%, close to the 3.4% expected.
Likewise, the core CPI, which excludes food and energy, was at 3.4%, slightly lower than the projected 3.5%. These numbers indicate a slowdown in inflation rates, which is generally beneficial for risky assets such as cryptocurrencies as they can lead to a reduction in interest rates.
In addition, the producer price index (PPI) also reflected this trend with an overall figure standing at 2.2% compared to the expected 2.5%. The year-over-year core PPI was 2.3%, lower than the expected 2.4%. Monthly numbers also contracted, which would normally boost market confidence and the crypto market has not followed suit.
Federal Reserve Policies
THE Federal ReserveThe position of is a central factor in current market dynamics. Federal Reserve Chairman Jerome Powell delivered a surprisingly hawkish speech despite weaker inflation data.
Powell’s statements and the change in rate cuts planned for 2024 indicate that the FED will likely not be as aggressive as the market anticipates in easing monetary policy. This has led to a paradox: Due to lower inflation figures that should theoretically allow for rate cuts, the Fed’s cautious approach could have a negative impact on the market.
Additionally, Treasury yields have been quite volatile; the two-year bond yield fell significantly, hitting a two-month low of 4,694%. While these are generally bullish indications for risk assets such as Bitcoin, the strength of the US dollar, which has been boosted by recent ECB rate cuts, has put pressure on cryptocurrencies .
Gold Rises as Bitcoin Struggles
Unlike cryptocurrencies, gold has seen bullish momentum, further highlighting the divergence in asset behaviors under similar economic conditions. The resilience of gold, often considered a safe haven, could drive investors away from cryptocurrencies, which are still seen as more speculative investments.
In the meantime, Bitcoin (BTC) has seen a bearish rise over the past week, with a 5% decline from an intra-week high of $70,059 to a weekly low of $65,267. At press time. BTC was trading at $66,320, down 1.29% from the 24-hour high.
Source: CoinMarketCap
Major cryptocurrencies also saw a decline. THE XRP Price, for example, saw a 2% decline over the past 7 days. However,
The lack of dynamism in crypto markets may also be linked to regulatory uncertainties, such as the impending Ethereum ETF decision. This made investors cautious, contributing to the downward pressure.
However, bullish momentum has resumed in the ETH market with the updated timetable for a Ethereum Spot ETF before July 2. At press time, Ethereum (ETH) price was trading at $66,269, up 2.47% from the 24-hour low of $3,364.