As investors continue to weigh the complex signals of the US economy, financial market volatility intensified on Wednesday.
Federal Reserve Chairman Jerome Powell reiterated on Wednesday, during a speech at Stanford University, that the central bank is not in a hurry to cut interest rates until it has more confidence that inflation will sustainably drop to 2%.
On Wednesday, major US stock indices opened higher but ended the day with mixed results. The S&P 500 and Nasdaq Composite both rose 0.11% and 0.23% respectively, while the Dow Jones Industrial Average fell 0.11%. In the cryptocurrency market, Bitcoin fell from a daily high of $66,940 to a low of $64,520, but recovered to around $65,680 by the end of the US trading session, with a 24-hour volatility of less than 1%.
Altcoins experienced mixed trading, with most tokens within the top 200 recording losses. The 14th largest cryptocurrency, Bitcoin Cash (BCH), completed its block reward halving, but its price still dropped 10% to $572 on the same day, significantly lower than its all-time high of around $4,355 in 2017.
Newly launched stablecoin protocol Ethena (ENA) saw the highest increase, with a gain of 34.2%. ENA began trading on April 2nd with an initial price of around $0.60 and is currently trading at $1.15, with a market capitalization of $1.6 billion. The project has also received support from former BitMEX CEO Arthur Hayes, who expects the price to rise to $10.
Other top-performing tokens include Jito (JTO) with a 21% gain, and IoTeX (IOTX) with a 20.8% gain. Memecoin (MEME) experienced the largest decline, falling 14.3%, followed by Pendle (PENDLE) with a 13.8% drop, and Core (CORE) with a 13% drop.
The overall market capitalization of cryptocurrencies is currently $2.48 trillion, with Bitcoin’s dominance rate at 52.2%.
Net outflows from spot Bitcoin ETFs
Funds flowing into new spot Bitcoin ETFs have been suppressed in recent weeks, which may prompt renewed interest in the macro drivers of price direction.
Most of Bitcoin’s recent surge occurred between mid-February and mid-March. During the same period, spot ETFs added approximately 5,000-13,000 Bitcoins daily. However, since then, Grayscale Bitcoin Trust (GBTC) has continued to experience outflows, while other ETFs have slowed their accumulation pace, resulting in an overall negative net flow. Meanwhile, Bitcoin’s price has dropped by around 10% from its record high of nearly $73,500 on March 12th.
According to data from SoSoValue, Ark Invest/21Shares’ ARKB fund saw a net outflow of $87.5 million on Tuesday, the highest level since its launch, surpassing the outflow of Grayscale GBTC, which was $81.9 million on the same day.
US inflation rebound
US inflation, which steadily declined throughout 2023, has actually risen in the first few months of 2024. In February, the inflation rate was 3.2%, still well above the Federal Reserve’s 2% target. Meanwhile, according to government statistics, the economy appears to continue its steady growth, with over 200,000 new jobs added each month so far this year and an unemployment rate close to historic lows.
Earlier on Wednesday, ADP reported that private sector employment increased by 184,000 in March, higher than the 155,000 in February and the expected 148,000. The main employment event will be the nonfarm payrolls report released by the government on Friday, with economists expecting an addition of 200,000 jobs.
The recent strong data has pushed the yield on the 10-year US Treasury bond to a high of 4.43% for 2024, and the US dollar exchange rate to its highest level since November last year. Both of these factors may dampen the prices of risk assets, including Bitcoin.
Semir Gabeljic, an executive at Pythagoras Investments, stated, “Bitcoin’s drop to $65,000 is mainly attributed to recent macro prospects and rising bond yields. A higher interest rate environment usually reduces investors’ risk appetite.”
Bitcoin’s significant pullbacks often occur in the mid-term of a bull market
Koroush AK, a long-term cryptocurrency trader, provided his insights on the market condition, stating that Bitcoin is prone to significant pullbacks in the mid-term of a bull market.
He said, “It is expected that the price will drop to a minimum of $62,000, and trading within this range will become more difficult, making altcoins more accessible. The isolated altcoin narrative is expected to continue, even if we enter a more neutral environment in the coming weeks. Market sentiment and high timeframe structure still appear bullish, and my plan remains the same: buy on dips.”
Cryptocurrency futures rates and open interest have declined
Singapore-based derivatives trader Jun-Young Heo from Presto remarked, “Perpetual futures funding rates for most cryptocurrencies have returned to 1 basis point, and global futures open interest has decreased by 10% overnight, indicating that some leveraged long positions have been closed.”
He added, “Due to the recent stagnation in Bitcoin ETF inflows and the market prices of BTC and ETH being below the 20-day moving average, some trend followers may view yesterday’s slump as a pause in the two-month-long rally.”
Justin d’Anethan, Head of Business Development for Keyrock in the Asia-Pacific region, stated in an interview with The Block that Bitcoin’s halving, expected to occur later this month, has historically been a bearish event followed by a long-term bullish cycle.
Author: Mary Liu from Bitpush News
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