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The crypto market found some footing Friday, yet some traders may still be feeling tripped up.
The price of Bitcoin hit a weekly low of $59,573 earlier today—noticeably off from all-time highs of $73,000 last month, according to CoinGecko. By midday, Bitcoin was up roughly 9% and trading for $65,000. What gives?
“Ultimately, in the background, what is driving the bus is macro,” Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors, told Decrypt. “And [last] Friday, we ran into this perfect storm of bad news.”
Investors across the globe were jolted last week by growing geopolitical tension in the Middle East as stronger-than-expected economic data in the U.S. clouded investors’ outlook on Federal Reserve rate cuts, Farrell said. The implication is that, amid uncertain times, investors flock to the greenback for shelter from the fallout, he said.
“People rush into the asset that they can remit payments in, and that’s the U.S. dollar, so I think you saw a lot of panic selling,” Farrell said. “In the background of that, from a financial conditions perspective, we had a really hot CPI print.”
The Bureau of Labor Statistics’ Consumer Price Index (CPI) indicated that inflation was unchanged at 3.5% in the 12 months through March compared to its prior release. That stoked fears the U.S. central bank could be forced to hold rates higher for longer to bring inflation back down to the Fed’s target of 2% annually, according to Grayscale’s Managing Director of Research Zach Pandl.
“Perceptions around Federal Reserve rate cuts have moved from the middle of this year to much later,” he told Decrypt. “The Federal Reserve is now pivoting away, at least on the margin, from rate cuts and that’s had a negative impact on a lot of assets.”
Within crypto, Pandl sees one key factor that may be contributing to Bitcoin’s recent weakness. Inflows into spot Bitcoin ETFs, “which were at boomy levels in February and March,” have petered off as of late, he said.
Since last Friday, for example, spot Bitcoin ETFs have seen net outflows totaling $319 million, according to data from analytics platform Coinglass. Still, market participants have had only a handful of months to digest the investment vehicles that were approved in January.
“Many of us believe we will see another wave of ETF demand as these products go through an approval process among a broader set of financial advisors and platforms,” Pandl said. “But they’ve leveled off more recently and so you don’t have that positive catalyst for price.”
Though Bitcoin’s rattle has caught crypto traders’ attention, outsized losses among so-called altcoins may be contributing to the crypto community’s malaise, pseudonymous crypto influencer @basedkarbon said on Twitter after popular meme coins like Solana’s Dogwifhat (WIF) plummeted last Friday.
“Alts nuked so hard this weekend that now most of [Crypto Twitter] thinks the bull market is over,” the account wrote Monday.
alts nuked so hard this weekend that now most of ct thinks the bull market is over
— davis 🐺🦊 (@basedkarbon) April 15, 2024
Based on several factors, it doesn’t look like the bull market has run out of steam just yet, Glassnode analyst Brett Singer told Decrypt. Looking at the going price for Bitcoin relative to when people bought it—also known as Bitcoin’s MVRV Z-Score—the market resembles previous cycles, he said.
“These events definitely do impact it, but the fundamentals itself say that we’re still growing in that direction,” Singer said of shocks in the Middle East. “There’s still momentum, and the market is acting very similar to how it has in previous cycles.”
