Elsa Ohlen
Bitcoin fell early Friday, moving decisively below the psychologically important $100,000 level after hitting record highs earlier this week.
Bitcoin is down 5.9% in the last 24 hours to $95,237, according to CoinDesk data. The price of the digital token was hurt by the Federal Reserve's Wednesday comments indicating fewer interest-rate cuts in 2025, which have dampened the mood for the equity market as well.
The latest key measure of inflation, the personal-consumption expenditures price index came in below expectations on Friday, rising at a monthly pace of 0.1% in November. While that is a slower price progression than the 0.2% economists polled by FactSet had predicted, the annual rate is still at 2.4% -- above the Fed's target of 2%.
That matters for stocks and cryptocurrencies because the central bank's path to further interest rate cuts will depend largely on what happens with inflation, and how fast the target of 2% can be reached. The lower inflation, the more likely the Fed is to cut rates.
The entire crypto sector has come under pressure in the wake of the stock market pullback, market strategist Louis Navellier noted. The S&P 500 fell 2.95% Wednesday -- its worst one-day drop on a Fed-decision day in almost 15 years.
"While the magnitude of bitcoin's decline is comparable to that of stocks, it is seen as a show of strength, as bitcoin often loses more," FxPro analyst Alex Kuptsikevich said.
It has been a strong year for both stocks and Bitcoin. The S&P 500 and the Nasdaq Composite are up 23% and 29%, respectively. Bitcoin has gained more than 100%, fueled by expectations that the incoming Trump administration will ease regulation on the crypto industry.
Bitcoin, however, is cyclical, Kuptsikevich noted. "As in past cycles, we saw some indecision before the psychologically important level at the end of the year. This time, it was the 100k mark and the subsequent acceleration after making the highs, fueled by both hype and liquidation of short positions," he said. "The repetition of such cyclicality sets the stage for further acceleration in price growth next year."
Write to Elsa Ohlen at elsa.ohlen@barrons.com
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(END) Dow Jones Newswires
December 20, 2024 09:59 ET (14:59 GMT)
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