Why the Cryptocurrency Market Has Declined and What’s Next for Bitcoin – DL News
- Bitcoin is back below $100,000.
- The price decline came amid strong economic data in the United States.
- Market analysts study the impact of macro factors on the price of Bitcoin.
Bitcoin’s Trump-era hype faces a reality test
The crypto asset’s recent rally came to a screeching halt and fell to $95,000 on Wednesday, a 7% decline this week. The broader cryptocurrency market also lost 7% of its value to $3.48 trillion over the past 24 hours.
This decline coincided with strong economic data from the United States on Tuesday, including an increase in job opportunities and manufacturing.
These positive economic numbers reinforce Federal Reserve Chairman Jerome Powell’s position that reducing the pace of interest rate cuts this year may be enough to manage inflation.
Totally driven
This is worrying news for Bitcoin investors.
Their previous bullish optimism was built on a combination of the central bank aggressively cutting interest rates and a second presidency of Donald Trump heralding regulatory clarity for cryptocurrencies.
“With no new crypto narrative to adhere to, the market is currently following traditional financing habits,” said Philip Pepper, co-founder of Swarm Markets, a DeFi platform for token stock trading. DL News.
Investors’ appetite for riskier assets such as cryptocurrencies and technology stocks tends to increase when interest rates are low, motivating traders to seek higher returns.
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Bieber said the current overheated market conditions will continue until investors have greater clarity on the Trump administration’s cryptocurrency policies.
Macroeconomic data will remain crucial to predicting Bitcoin’s price, analysts at cryptocurrency research firm 10x Research said in a report on Wednesday.
They pointed to the Fed’s response to strong economic data in the United States and global liquidity as key drivers of Bitcoin’s price.
In the short term, Bitcoin could slide into banana territory resulting from both macro factors. The banana zone describes a set of volatile price movements of an asset. It gets its name from its shape and because the stuff tends to be a little banana.
BitMEX founder Arthur Hayes also noted The liquidity of the dollar and its impact on the price of Bitcoin In his latest post on his blog.
Hayes said that bitcoin and cryptocurrency prices rise when dollar liquidity increases.
It is still in demand
Despite the current market turmoil, analysts say the overall sentiment towards Bitcoin remains bullish.
On the chain Data Cryptocurrency analytics provider CryptoQuant shows that clear demand for Bitcoin “remains very high.” High“.
The metric compares the volume of inactive Bitcoin against the issuance of new Bitcoin from miners. It is considered high if the decline in inactive Bitcoin still far exceeds the new supply of Bitcoin from miners.
Analysts also pointed to the historical performance of Bitcoin’s price to dispel fears of a collapse.
Bitcoin fell in January after the last US presidential election. In January 2017 and January 2021, Bitcoin fell by 36%.
Crypto market drivers
- Bitcoin fell 4% over the past 24 hours to trade at $95,380.
- Ethereum price fell 5.5% to trade at $3,373.
What we read
Osato Afan Nomayo He is our DeFi correspondent based in Nigeria. It covers DeFi and technology. Got a tip? Please contact him at osato@dlnews.com.
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