Bitcoin and other cryptocurrencies fell Tuesday as sentiment among digital asset traders turned more cautious after news that Binance, by far the world's largest crypto exchange, is being sued by U.S. regulators. That's not the only reason for the declines, however.
The price of Bitcoin has fallen 3% over the past 24 hours to $27,000, the lowest consistent price for the largest crypto in almost two weeks, when its latest rally picked up steam and carried prices to around $28,500, the highest level since last June.
"The decline was triggered by the CFTC's surprise lawsuit against Binance," said Alex Kuptsikevich, an analyst at broker FxPro. "Investors should ask themselves again: Are my funds safe? If banks are a risk, crypto exchanges are an even more significant risk."
Indeed, the Commodity Futures Trading Commission on Tuesday sued Binance and its co-founder and CEO, Changpeng Zhao, alleging that they violated rules requiring futures and other derivatives be traded on regulated platforms.
But that might not be the only factor driving prices lower in the short term. MicroStrategy (ticker: MSTR), a software company chaired by high-profile Bitcoin bull Michael Saylor that owns significant amounts of digital assets, revealed on Monday that it had purchased another tranche of Bitcoin -- 6,455 coins for around $150 million.
"An adverse market reaction following MicroStrategy purchase announcements is typical, with Bitcoin averaging -2.2% on MicroStrategy announcement days. The average 7-day return is more balanced at -0.2%," analysts at digital asset market research group K33 Research wrote in a note.
The shifting outlook around interest rates means Bitcoin continues to be sensitive to macroeconomic forces and moves in the Dow Jones Industrial Average and S&P 500, since higher rates dampen demand for risk-sensitive assets. While traders will likely have to wait until Friday for the next major macro catalyst, Tuesday sees the release of economic data covering trade, inventories, and consumer confidence, with public remarks from a Federal Reserve official also on the docket.
Beyond Bitcoin, Ether -- the second-largest crypto -- lost 1.5% to $1,730. Smaller cryptos or altcoins were also lower, with Cardano down 1% and Polygon slipping 2.5%. BNB, the native token of the Binance exchange, tumbled 5%. Memecoins were also weaker, with Dogecoin and Shiba Inu each shedding 1.5%.