Markets
Bitcoin Falls to $65,000, Expert Uncovers Drivers of Crypto Market Bloodbath
The cryptocurrency market has been experiencing a significant downturn, with Bitcoin leading the way by returning to the $65,000 mark after failing to retest its all time high of US$73,700 reached in March.
Market expert Michael van de Poppe has shed light on the reasons behind this ongoing bloodbath, highlighting several key factors that have contributed to the current state of the market.
Uncertainties of crypto market battles
A key event highlighted van de Poppe is last Wednesday’s release of Consumer Price Index (CPI) data, which has a major impact on the Federal Reserve’s decision on interest rates.
The data, which was below expectations, favored risk assets. A lower-than-expected core CPI of 3.3% (vs. 3.4% expected) and a core CPI of 3.4% (vs. 3.5% expected) pointed to potential rate cuts or a positive outlook for future rate cuts, providing favorable market conditions.
Another significant event was the release of data from the Producer Price Index (IPP), which provides inflation data from the producer’s perspective. The data revealed a lower than expected regular PPI score of 2.2% (vs. 2.5% expected) and a Y/Y core PPI score of 2.3% (vs. 2.4% expected).
Furthermore, the monthly data presented negative values, further favoring risky assets. However, van de Poppe claims that despite these positive indicators, the crypto market continued its downward trend.
According to van de Poppe, the release of data on consumer sentiment on Friday also impacted the market. Consumer sentiment is considered a market leader and an indicator of market strength or weakness. The data was below expectations, with a score of 65.6 (versus 72.1 expected).
This data signaled a lack of economic strength, potentially fueling bullish sentiments for risk assets and a shift toward crypto-native markets.
However, Federal Reserve Chairman Jerome Powell gave an unexpectedly aggressive speech. Despite the data pointing to the need for rate cuts and worsening economic conditionsPowell maintained an aggressive tone and reviewed potential rate cuts in 2024.
According to Michael van de Poppe, this outlook did not bode well for the markets, adding to existing uncertainties and the notorious price volatility observed in recent days.
Bitcoin Price Fight Continues as Bond Yields Fall
The analyst also highlighted that market indicators, such as Treasury bond yields, decreased. The 2 year old Treasury bond yield fell to its lowest point in two months, while the 10-year yield continued to fall to its lowest point since early April.
These indicators typically suggest favorable conditions for Bitcoin and risk assets, implying a greater likelihood of a potential rate cut. However, the strength of the US dollar persisted due to the rate cut by the European Central Bank (ECB).
Van de poppe believes that this unexpected strength in the dollar, driven by the ECB’s actions, has further complicated the situation. market dynamicssince rate cuts are generally necessary for economic stability.
In short, the cryptocurrency market, especially Bitcoin, has declined substantially as it struggles to regain its previous highs. Despite positive economic data pointing to potential rate cuts and market indicators favoring risky assets, the market was unable to respond positively.
Continuing uncertainty surrounding events, such as the price of the Ethereum ETF, contributed to market weakness. With rate cuts on the horizon and continued dollar strength, the next few weeks will likely be critical in determining market direction.
At the time of writing, Bitcoin was trading at $65,280, down 2% in the last 24 hours and more than 5% in the last seven days.
Featured image of DALL-E, chart from TradingView.com