After a period of relative stability, Bitcoin BTCUSD –1.24% and other cryptocurrencies are experiencing significant downward movement as traders unload digital assets. This selling spree comes as expectations solidify that interest rates will remain elevated for a longer duration than previously anticipated.
Within the last 24 hours, the value of Bitcoin has plummeted by 2% to $28,500. This sharp decline is a departure from the subdued behavior seen over recent months, during which Bitcoin has largely remained within the $29,000 to $30,000 range, displaying remarkably low volatility.
Antoni Trenchev, co-founder and managing partner at crypto lender Nexo, commented on the recent market activity: “Bitcoin investors have been searching for a trigger to extricate it from its low-volatile sideways snooze fest; now comes the true test of resilience—and nerves—as Bitcoin falls to the bottom of its almost two month trading range.”
Bitcoin’s movement parallels the broader stock market, with the Dow Jones Industrial Average DJIA –0.52% and S&P 500 SPX –0.76% both witnessing notable declines in the past couple of days. Economic data releases in the U.S. have underscored the strength of the economy, coupled with expectations of upgraded GDP growth forecasts for the third quarter. Furthermore, minutes from the Federal Reserve’s June policy decision have confirmed its commitment to counter inflation by implementing higher interest rates.
A robust economy provides little incentive for the Fed to reduce interest rates from their current high levels, causing investors to anticipate additional rate hikes. Since March 2022, rising interest rates have exerted considerable influence on assets sensitive to risk, such as stocks and Bitcoin. Consequently, the recent news bodes ill for the cryptocurrency market.
As Bitcoin experiences this abrupt shift, experts are considering its potential downward trajectory. Alex Kuptsikevich, an analyst at broker FxPro, pointed out, “The fall below $28,800 confirmed the local dominance of the bears. The following key support points are now at the next round level of $28,000 and then at the $27,200 area, where the 200-day moving average and uptrend support from last November are centered.”
Bitcoin’s decline has had a ripple effect on the cryptocurrency landscape. Ether ETHUSD –0.92%, the second-largest crypto, has fallen by 2% to $1,790. Altcoins, including Cardano and Polygon, have also witnessed declines of about 1%. Memecoins, such as Dogecoin DOGEUSD –0.01%, have displayed weakness, with Dogecoin dropping 3% and Shiba Inu shedding 8%.
As investors navigate this new phase of market volatility, the fate of cryptocurrencies hangs in the balance. The interplay of interest rates, economic data, and investor sentiment will continue to shape the trajectory of Bitcoin and the wider digital asset market.
