Crypto stocks dropped with Bitcoin in premarket trading Wednesday. Bit Digital fell 8.5%; Marathon Digital and Canaan fell 4.8%; Riot Blockchain fell 4.3%; Coinbase and MicroStrategy fell about 3%.
Bitcoin and other cryptocurrencies slipped Wednesday, in step with the stock market as digital assets continued to be sensitive to macroeconomic forces. But bullish signals were still suggesting that cryptos are in a positive groove.
The price of Bitcoin has fallen 2% over the past 24 hours to $29,100, declining below the psychologically important $30,000 mark—which represents where prices stood last June, before the crypto selloff accelerated into a brutal bear market. The largest digital asset passed $30,000 last week, spiking to near $31,000 at points, but has struggled to consolidate gains or move higher amid some signs of profit-taking.
“Bitcoin appears like it might consolidate here, but a rally above $31,500 could open the door to some momentum trades,” said Edward Moya, an analyst at broker Oanda.
Pushing prices lower in the short term were wider worries over inflation and the prospect of more interest-rate hikes, which also was weighing on the Dow Jones Industrial Average and S&P 500. A series of dramatic rate hikes from the Federal Reserve last year—a bid to tame decades-high inflation—drastically dampened demand for risk-sensitive assets, slamming both cryptos and stocks. While Bitcoin’s rally this year has come amid expectations of easier monetary policy from the Fed, the narrative remains vulnerable.
Among the latest catalysts shaking investor confidence on the prospect of looser monetary policy were comments from St. Louis Federal Reserve President James Bullard, who called for higher rates yet again on Tuesday. Red-hot inflation data out of the U.K. on Wednesday also has raised global hackles over persistent price-growth.
“The worry that rates will continue to be hiked in the U.S. is pervading financial markets with investors concerned that further tightening will increase the chances of recession and cause ripple effects around the world,” said Susannah Streeter, an analyst at broker Hargreaves Lansdown.
But, more broadly, there remain multiple bullish signs for Bitcoin, which has already rallied some 80% so far this year in a surge from the depths of its “crypto winter,” spurring calls of a new bull market for digital assets. Bitcoin recently closed out its best quarterly return since the all-time high in late 2021.
“The strong market performance in 2023 is a stark contrast to 2022, and suggests a favorable regime shift is under way,” analysts at crypto market intelligence firm Glassnode wrote in a recent note.
“Several on-chain indicators are suggesting that bear market conditions (or at least the worst of it) may now be behind us,” the Glassnode analysts wrote, referring to blockchain network data covering individual Bitcoin trades, closely scrutinized by analysts because it was “surprisingly consistent.”
Bitcoin is in “neutral territory,” according to Glassnode, holding above the zone between $16,000 and $25,000 in which significant Bitcoin volume has changed hands. “We note that much of this supply remains tightly held by those buyers, whilst profits are being taken, and network utilization is improving, all supporting the strong market performance,” the analysts wrote.
Beyond Bitcoin, Ether —the second-largest crypto, which has outperformed since the Ethereum blockchain successfully completed a critical upgrade last week—dropped 5% to below the key $2,000 level. Smaller cryptos, or altcoins, were also weak, with Cardano and Polygon down 6% each. Memecoins were unspared, as Dogecoin and Shiba Inu both shed 6%.
Comments