Key Takeaways
- A bitcoin sell-off put it firmly in correction, more than 10% lower than last week's all-time high.
- Profit taking after a quick run-up in prices and jitters ahead of the Federal Reserve meeting tomorrow may have been behind the pullback in bitcoin prices.
- Lower rates would weaken U.S. Treasury yields, making riskier assets such as cryptocurrencies more attractive to investors.
- Bitcoin's drop dragged down other crypto-tokens and crypto-related stocks such as MicroStrategy.
Bitcoin (BTC) was trading just a shade under $65,000 Tuesday afternoon ahead of the Federal Reserve’s interest rate decision tomorrow. The sell-off spilled over to the broader crypto markets, dragging down other tokens and crypto-related stocks.
Bitcoin In Correction, Eyes On The Fed
Bitcoin is technically in a correction, which means it's trading more than 10% lower than its prior high of $73,000 set not a week ago.
And this big move in the largest cryptocurrency by market capitalization has also spilled over into Ether (ETH), Solana (SOL) and Cardano (ADA), which also saw big drops in trade.
Crypto investors are closely 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 such as cryptocurrencies more attractive to investors. However, higher rates for longer would hurt the investment case for riskier assets to some extent.
The Bank of Japan also raised rates for the first time in 14 yearsTuesday, which could signal potential pressure on U.S. Treasurys. The market is also watching for the consequences of the halving next month when the price of the cryptocurrency is expected to increase.
ETFs Drove The Rally, Not The Correction
The demand for bitcoin generated by spot bitcoin ETFs, which began trading in January this year, was credited for the recent rally in the cryptocurrency's prices. Despite almost $12 billion in outflows from Grayscale's Bitcoin ETF Trust (GBTC) since the other ETFs started trading, it’s not the ETFs moving the cryptocurrency, according to Eric Balchunas, a Bloomberg Intelligence ETF analyst.
“The selling of Bitcoin began last week when there were inflows into the ETF,” he said in an interview. “This is selling that's coming from outside the ETFs. So, it’s coming from inside the crypto world.”
The selling has been steady and it’s par for the course for Bitcoin, which had a “pretty sweet ride up” from $40,000 to above $73,000.
"You can't go up at that rate that quickly that long,” Balchunas said.
Crypto-Related Stocks Feel The Heat
MicroStrategy (MSTR) stock tanked by as much as 16% Tuesday before gaining back some of those losses after the company disclosed the details of its most recent bitcoin buying spree.
It added roughly 9,245 bitcoins for approximately $623 million in just seven days ending March 18, using money it raised via a bond offering as well as about $30 million of extra cash. The average price for the entire purchase was $67,382per bitcoin. It now holds about 214,246bitcoins or roughly 1% of bitcoins that can exist with the supply capped at 21 million.
The bitcoin halving event in April could be a negative for bitcoin miners as it will make it harder for them to earn money. And some miner stocks are already feeling the heat. Marathon Digital (MARA), Riot Blockchain (RIOT) and Cleanspark (CLSK) dropped in trading. Crypto trading platforms Coinbase (COIN) and Robinhood (HOOD) were also trading lower.
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FAQs
This demand for higher-yielding assets could also have extended to crypto assets. Conversely, when the Fed, and other major central banks increase benchmark interest rates, higher-yielding assets become less attractive. It could be argued that the same applies to crypto assets.
Will Bitcoin go back up? ›
However, the price subsequently dropped significantly, leading to a bearish phase throughout 2022. Markets began to recover somewhat in 2023, and early 2024 showed optimism, with expectations for Bitcoin price to surpass $100,000 following the fourth halving at block height 840,000.
Why is Bitcoin falling? ›
Bitcoin's latest weakness could mostly be attributed to a general risk-off sentiment in the market in reaction to the macroeconomic data, analysts at crypto-trading firm QCP Capital wrote in a note.
Who is controlling the crypto market? ›
A cryptocurrency blockchain is similar to a bank's balance sheet or ledger. Each currency has its own blockchain, which is an ongoing, constantly re-verified record of every single transaction ever made using that currency. No company, country, or third party is in control of it; and anyone can participate.
Does Bitcoin go up when stocks go down? ›
Key Takeaways. Cryptocurrency and stock prices are somewhat correlated after accounting for cryptocurrency's volatility. Many of the factors that affect stock prices also affect cryptocurrency prices. Investors and traders treat cryptocurrency the same way they treat stocks, so prices tend to trend the same.
How low will Bitcoin go in 2024? ›
What is the projected cost of Bitcoin in 2024? For 2024, the BTC price will have a projected high of $120,000 and a potential low of $35,000. How much will 1 Bitcoin be worth in 2025?
Is it good to buy Bitcoin now? ›
Bitcoin is more stable than it's been in years, and the next halving is fast approaching. Taking current market conditions into account, now might well be the perfect time to invest, so long as you remain cognizant of the risks.
Does Bitcoin have a future? ›
“I could potentially see Bitcoin to become the 21st century gold” Crypto-currencies' market cap of more than one trillion us dollars makes them too important to ignore. Marion Laboure, Analyst at Deutsche Bank Research, tells us how the development of digital currencies will shape the future of payments.
What will $100 of Bitcoin be worth in 2030? ›
If this pattern continues into 2030, the price could peak around 2029 or 2030, potentially aligning with Wood's price prediction. If Wood is correct and Bitcoin reaches $3.8 million, a $100 investment in Bitcoin today would be worth $5,510 in 2030. This translates to a compounded annual growth rate (CAGR) of over 95%.
Which coin has 1000x potential? ›
Rollblock (RBLK) is becoming one of the most prominent altcoins. Thanks to its long-term growth potential, this stage 1 presale star has the potential to compete with huge coins such as Solana (SOL), Avalanche (AVAX) and Binance Coin (BNB). In fact, certain analysts peg this rookie as the next 1000x altcoin in 2024.
Changes in the interest rate set by the Federal Reserve can impact borrowing costs for businesses and consumers, which, in turn, can affect the value and performance of stocks, commodities, and cryptocurrencies.
What happens to currency when Fed raises interest rates? ›
Generally, higher interest rates increase the value of a country's currency. Higher interest rates tend to attract foreign investment, increasing the demand for and value of the home country's currency.
Does crypto go up when inflation goes up? ›
Crypto and the consumer price index (CPI)
Some question Bitcoin's store of value and its potential to act as a hedge against inflation when looking at the CPI. But the graph shows that if there is any correlation between the CPI rising and Bitcoin's price, it is negative.
Why does Bitcoin go up when interest rates go down? ›
“More investors will likely seek out higher-yielding alternative assets as treasury returns decline. This flow of capital into nontraditional investment classes like cryptocurrencies could further support an ongoing rally in digital-currency prices,” they said in a note.
