Bitcoin
Bitcoin in Correction Amid Profit Taking, Fed Meeting Jitters, Crypto Stocks Tank
Key Takeaways
- Bitcoin’s sell-off has put it firmly in correction, more than 10% below last week’s all-time high.
- Profit-taking after a rapid rise in prices and nervousness ahead of tomorrow’s Federal Reserve meeting may have been the cause of the pullback in bitcoin prices.
- Lower rates would weaken U.S. Treasury yields, making riskier assets like cryptocurrencies more attractive to investors.
- Bitcoin’s drop dragged down other crypto tokens and crypto-related stocks such as MicroStrategy.
Bitcoin (Bitcoin) was trading just below $65,000 on Tuesday afternoon ahead of the Federal Reserve’s interest rate decision tomorrow. The selloff spread to broader crypto markets, dragging down other tokens and crypto-related stocks.
Bitcoin in correction, with an eye on the Fed
Bitcoin is technically in correction, meaning it is trading more than 10% below its previous high of $73,000, set less than a week ago.
And this big movement in the largest cryptocurrency by market capitalization also had repercussions on Ether (ETH), Solana (SUN) and Cardano (ADA), which also saw major drops in trade.
Crypto Investors Are Watching Close watching the Federal Reserve this week for clues about the timing or magnitude of an interest rate cut. Lower rates would weaken U.S. Treasury yields, making riskier assets like cryptocurrencies more attractive to investors. However, higher rates for longer periods of time would, to some extent, harm the investment scenario for riskier assets.
O Bank of Japan also raised rates for the first time in 14 years on Tuesday, which could signal potential pressure on U.S. Treasury bonds. The market is also aware of the consequences of reduce by half next month, when the price of the cryptocurrency is expected to increase.
ETFs drove the rally, not the correction
Demand for bitcoin generated by spot bitcoin ETFs, which began trading in January this year, has been credited for the recent rise in the cryptocurrency’s prices. Despite nearly $12 billion in outflows from Grayscale’s Bitcoin ETF Trust (GBTC) since other ETFs began trading, it is not the ETFs that move the cryptocurrency, according to Eric Balchunas, ETF analyst at Bloomberg Intelligence.
“Bitcoin selling started last week when there were inflows into the ETF,” he said in an interview. “This is a sale that comes from outside ETFs. So it’s coming from within the crypto world.”
The selling has been constant and is normal for Bitcoin, which has seen a “very good rise” from $40,000 to over $73,000.
“You can’t climb at that rate that quickly for that long,” Balchunas said.
Crypto-Related Stocks Feel the Heat
Microstrategy (MSTR) shares plunged as much as 16% on Tuesday before recouping some of those losses after the company released details of its latest bitcoin buying spree.
It added about 9,245 bitcoins for approximately $623 million in just seven days ending March 18, using money raised through a bond offering as well as about $30 million in extra cash. The average price for the entire purchase was $67,382 per bitcoin. It now holds about 214,246 bitcoins or about 1% of the bitcoins that can exist with the supply limited to 21 million.
The April bitcoin halving event could be negative for bitcoin miners as it will make it harder for them to make money. And some mining stocks are already feeling the heat. Digital Marathon (MARA), Riot Blockchain (REBELLION) and Cleanspark (CLSK) fell in negotiations. Coinbase Crypto Trading Platforms (COIN) and Robinhood (HOOD) were also trading lower.