With Bitcoin’s value declining to $65,000—far below its March record of $73,700—the market for cryptocurrencies has seen a notable collapse. Michael van de Poppe, a market expert, has found a number of main elements causing this continuous fall.
Van de Poppe notes as a turning point last Wednesday’s publication of the Consumer Price Index (CPI). The CPI numbers, which affect Federal Reserve interest rate decisions, came in below projections. Suggesting favorable conditions for risk assets, a headline CPI of 3.3% and a core CPI of 3.4% hinted at possible rate cuts.
Bitcoin’s Treasury Bond Yield Trends
Further bolstering this view was the statistics on the Producer Price Index (PPI). With regular PPI at 2.2% and core PPI at 2.3%, the PPI revealed from a producer’s point of view lower-than-expected inflation. Monthly data also revealed negative tendencies usually favoring risk-on investments. Notwithstanding these encouraging signs, the crypto market kept dropping.
Considered a leading predictor of the state of the market, Friday’s consumer attitude also had influence. At 65.6, the sentiment score was lower than projected, implying economic weakness and maybe positive attitude toward cryptocurrencies. Still, the unexpectedly aggressive remarks of Federal Reserve Chairman Jerome Powell ran counter to these numbers. Powell’s posture, changing possible rate cuts in 2024, increased market volatility and uncertainty.
Van de Poppe also highlighted a drop in Treasury Bond Yields; the 2-year yield reached a two-month low while the 10-year yield dropped to its lowest point since early April. Usually signaling a possibility of rate reduction, these tendencies point to good times for Bitcoin and other risk-on assets. But the US Dollar’s ongoing gain, shaped by the rate cut by the European Central Bank, further convoluted market dynamics.
These elements taken together have kept the market for cryptocurrencies under pressure, especially for Bitcoin. Market reaction has stayed negative despite economic data implying possible rate reduction and good conditions for risk-on assets. The downturn of the market has also resulted from persistent uncertainty including the Ethereum ETF’s launch. The trajectory of the market will depend critically on the next weeks, with rate cuts hanging and the Dollar’s strength intact.
Bitcoin was trading at $65,280 at the time of posting; its latest 24-hour dip was 2% and over the prior week it dropped 5%.
