On Thursday, investors struggled with resurgent fears about the U.S. economy, which put pressure on cryptocurrencies.
At its most recent price of $27,901.60, Bitcoin was down approximately 4%, according to Coin Metrics. After the minutes of the Federal Reserve's July policy meeting were made public, the slide started.
According to the central bank minutes from the July meeting, the Fed sees "upside risks" to inflation that could possibly result in additional rate hikes. The Fed increased its benchmark interest rate at that meeting to the highest level in more than 22 years. Markets have been placing bets that the central bank won't change interest rates any further this year. As a result, the stock market plummeted on Wednesday for a second straight day, and the yield on 10-year US Treasury notes reached its highest level in response.
According to Coin Metrics, the correlation between bitcoin and stocks is at its lowest point in the past two years. However, in 2022, as a result of the Fed's campaign to control inflation by raising interest rates, it reached an all-time high.
According to Sylvia Jablonski, chief investment officer of Defiance ETFs, "Although inflation in and of itself could be a case for the growth of crypto assets, with inflation comes other aspects like risk off appetite from investors fearing a recession, and avoiding what bitcoin is deemed to be, riskier assets." "I have a sense that the higher beta equities and crypto are the victims of the end-of-summer lag, range-bound trading, and low volume that are common in August.
According to Kaiko, the 90-day volatility of bitcoin and ether fell this week to multi-year lows of 35% and 37%, respectively.
Bitcoin's return to $30,000 in late June, according to Needham's John Todaro, "had been on light volume so that rally has not had a ton of strength." One of the main positive catalysts for cryptocurrency, the eventual launch of a spot bitcoin ETF, also lost some speed this week, he continued.
"Bitcoin and crypto generally are pulling back," he said on CNBC, "with a U.S. [spot bitcoin] ETF likely not seeing a near term decision given the setback this week as well as expectations for higher rates for longer." "Halving expectations in Q1-Q2 of 24 and any ongoing SEC comments regarding ETFs" are the two remaining drivers.