Bitcoin
Why the crypto market fell 20% and Bitcoin 5% this week
The past week has seen significant declines in the cryptocurrency market, with overall valuations dropping 20% and Bitcoin by 5%.
This shift occurred between macroeconomic data and global financial indicators that contributed to the bearish sentiment.
Crypto market reaction to macroeconomic indicators
Michael van de Poppe cryptanalyst explained the situation that is happening in the market and said that despite the 20% drop in total market capitalization, things in the market are not as bad as they seem. As pointed out by van de Poppe, this correction may be forming a “higher low,” meaning the overall uptrend is still intact.
A “higher low” is a bullish signal that indicates the market may be regaining its mojo even after a pullback. This pattern may signal that investors are still optimistic about the future, buying into the market at lower prices in anticipation of future gains.
Recent data releases that have provided a rather mixed picture of the economic environment have been cited as the reason for this market trend. The Consumer Price Index (CPI), a key indicator used by the Federal Reserve in policymaking, increased 3.3%, close to the 3.4% expected.
Likewise, the Core CPI, which excludes food and energy, stood at 3.4%, slightly lower than the projected 3.5%. These numbers indicate a slowdown in inflation rates, which is generally good for risky assets like cryptocurrencies as they can lead to a reduction in interest rates.
Furthermore, the Producer Price Index (IPP) also reflected this trend, with the overall value standing at 2.2% against the expected 2.5%. Year-over-year core PPI was 2.3%, lower than the 2.4% expected. The monthly numbers also decreased, which normally should increase market confidence and the crypto market did not follow suit.
Federal Reserve Policies
O Federal ReserveCompany posture is a crucial factor in ongoing market dynamics. Federal Reserve Chairman Jerome Powell gave a surprisingly hawkish speech despite weaker inflation data.
Powell’s statements and the change in rate cuts projected for 2024 indicate that the FED is not likely to be as aggressive as the market predicts in easing monetary policy. This has led to a paradox where, due to lower inflation values that should theoretically allow for rate cuts, the Fed’s cautious approach could have a negative impact on the market.
Additionally, Treasury bond yields have been quite volatile; the yield on two-year bonds fell considerably, reaching a two-month low of 4,694%. While these are generally bullish indications for risk assets like Bitcoin, the strong dollar, which has been boosted by the ECB’s recent rate cuts, has put pressure on cryptocurrencies.
Gold Soars While Bitcoin Struggles
In contrast to cryptocurrencies, gold registered an upward dynamic, further highlighting the divergence in the behavior of assets in a context of similar economic conditions. The resilience of gold, often seen as a safe-haven asset, may be turning investors away from cryptocurrencies, which are still seen as more speculative investments.
About that, Bitcoins The (BTC) price has been on a tear over the past week, with a 5% drop from an intra-weekly high of $70,059 to a weekly low of $65,267. At the time of publication. BTC was trading at $66,320, down 1.29% from its 24-hour high.
Source: CoinMarketCap
Major cryptocurrencies also fell. O XRP Price, for example, suffered a 2% drop in the last 7 days. However, XRP corrected this by allowing the bulls to take control of the market and hence a 1.94% rally to trade at $0.4846 at the time of writing.
The lack of momentum in crypto markets could also be linked to regulatory uncertainties, such as the pending decision on the Ethereum ETF. This made investors cautious, contributing to the downward pressure.
However, bullish momentum has reignited in the ETH market with the timeline updated to a Spot Ethereum ETF until July 2nd. At press time, Ethereum (ETH) price was trading at $66,269, up 2.47% from its 24-hour low of $3,364.
Read too: XRP Price Risks Falling to $0.42 as SEC and Lawyers Defy Ripple in Penalties and Injunction