Due to the outflow of funds from digital asset investment products and the prospect of long-term increase in US borrowing costs weakening the cryptocurrency market, Bitcoin hit a one-month low.
On Tuesday, the largest digital asset BTC fell by 2.7% at one point, reaching levels not seen since mid-May, before narrowing losses around 1:20 p.m. Singapore time, trading at $65,740.
Ethereum, Solana, and Dogecoin, among other smaller tokens, also experienced declines.
Data from CoinShares International Ltd. showed that last week, the outflow of funds from digital asset products was around $600 million, the highest level since March. Continued inflation has led traders to lower their expectations of a rate cut by the Federal Reserve this year, posing a challenge to speculative investments like cryptocurrencies.
This quarter, the returns on stocks and bonds have been higher than Bitcoin, marking a reversal from the previous three months ending in March, when digital assets outperformed traditional markets significantly.
Caroline Bowler, CEO of BTC Markets Pty, said, “Cryptocurrencies are becoming increasingly susceptible to macro triggers,” adding that she remains optimistic about the long-term outlook.
Cryptocurrency Market Demand Weakens
Signs of weakening demand are evident in the cryptocurrency market (including new coins). A highly anticipated ZK token launched by a prominent Ethereum L2 project fell by one-third after its debut on Monday, becoming the latest in a series of tokens that have been heavily sold off despite high expectations.
In South Korea, a local report suggested that upcoming regulations next month might force exchanges to reduce the number of tokens available for investors. The country is an engine for demand for small digital assets (so-called altcoins), and this report may have spooked some traders.
Since the beginning of 2023, the price of Bitcoin has quadrupled and hit a record high of $73,798 in March, thanks to demand for US-listed exchange-traded funds. With the slowdown in ETF inflows, the uptrend has recently cooled off.