As investors continue to weigh the complex signals of the US economy, financial market volatility intensified on Wednesday.
Federal Reserve Chairman Powell reiterated on Wednesday, during a speech at Stanford University, that he is not in a hurry to cut interest rates until there is more confidence in inflation falling to 2%.
On Wednesday, major US stock indexes opened higher but ended the day with mixed results, with the S&P 500 and Nasdaq rising 0.11% and 0.23% respectively, while the Dow Jones fell 0.11%. In the cryptocurrency market, Bitcoin fell from its intraday high of $66,940 to a low of $64,520, recovering to around $65,680 by the end of the US trading session, with a 24-hour volatility of less than 1%.
Altcoins experienced mixed performance, with most tokens in the top 200 experiencing losses. The 14th largest cryptocurrency, Bitcoin Cash (BCH), completed its block reward halving, but its price still fell 10% to $572, far below its historical high of around $4,355 set in 2017.
The newly launched stablecoin protocol, Ethena (ENA), saw the highest increase, with a rise of 34.2%. ENA started trading on April 2nd with an initial price of around $0.60 and is currently trading at $1.15, with a market value of $1.6 billion. The project has also received support from Arthur Hayes, the former CEO of BitMEX. Hayes stated that he expects the price to rise to $10.
Other tokens with significant gains include Jito (JTO), which rose 21%, and IoTeX (IOTX), which rose 20.8%. The biggest decliners were Memecoin (MEME), which fell 14.3%, Pendle (PENDLE), which fell 13.8%, and Core (CORE), which fell 13%.
The current total market capitalization of cryptocurrencies is $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 rekindle interest in macro drivers of price direction.
Most of Bitcoin’s recent rise occurred from mid-February to mid-March, during which time spot ETFs added approximately 5,000-13,000 Bitcoins daily. However, since then, GBTC has continued to experience outflows, and the pace of holdings by other ETFs has slowed, resulting in an overall net outflow. Meanwhile, Bitcoin’s price has dropped by about 10% from its record high of nearly $73,500 on March 12th.
Data from SoSoValue shows that ARKB, a fund under Ark Invest/21Shares, saw net outflows of $87.5 million on Tuesday, the highest level since its launch, surpassing the outflows from Grayscale’s GBTC, which had outflows of $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. The inflation rate in February was 3.2%, still well above the Fed’s 2% target. At the same time, according to government statistics, the economy seems to be continuing to grow steadily, with over 200,000 new jobs added each month so far this year and the unemployment rate remaining near historic lows.
Earlier on Wednesday, ADP reported that private 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 non-farm payroll 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% in 2024, and the US dollar exchange rate to its highest level since November last year. These factors may suppress the prices of risk assets, including Bitcoin.
Semir Gabeljic, an executive at Pythagoras Investments, said, “Bitcoin’s drop to $65,000 is mainly due to recent macro prospects and rising bond yields. A higher interest rate environment usually reduces investors’ risk appetite.”
Bitcoin’s major pullbacks often occur in the mid-term of bull markets
Koroush AK, a long-term cryptocurrency trader, provided his insights on the market conditions, pointing out that Bitcoin is prone to major pullbacks in the mid-term of bull markets.
He said, “The lowest price is expected to drop to $62,000, and trading within this range will become more difficult, while altcoins will become easier. 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 structures are still bullish. My plan remains the same: buy on dips.”
Cryptocurrency futures rates and open interest have declined, according to Jun-Young Heo, a derivatives trader at Singapore-based Presto. He added, “The perpetual futures funding rate for most cryptocurrencies has returned to 1 basis point, and global futures open interest has decreased by 10%, indicating that some leveraged long positions have been closed.”
Heo commented, “Due to the recent stagnation in Bitcoin ETF inflows and BTC and ETH market prices being below the 20-day moving average, some trend followers may see yesterday’s slump as a pause in the two-month rally.”
Justin d’Anethan, Head of Business Development for Keyrock Asia Pacific, stated in an interview with The Block that Bitcoin’s halving is expected to occur later this month, which historically has been a bearish event followed by a long-term bullish cycle.
Author: BitpushNews Mary Liu
