Bitcoin Is Gaining Ground, but Investors Are Still Uncertain About US Economic and Monetary Policy
Crypto investors remain nervous even a day after Bitcoin plunged to a three-month low. This has caused bitcoin and many major altcoins to retreat and Tether’s stabilized USDT coin to be knocked off its $1 peg.
Bitcoin has traded at $25,239 for the past 24 hours, essentially unchanged after trading mostly in negative territory on Thursday. According to AskFX Indexes, BTC fell below this threshold on Wednesday for the first time since March as markets reacted to the Federal Reserve’s renewed commitment to tightening monetary policy, despite the central bank having suspended rate hikes for 14 months. The largest cryptocurrency by market cap has been approaching the $26,000 mark over the past few weeks.
Ether, the second largest cryptocurrency by market value, has been changing hands at a similarly slow pace lately, trading around $1,655, about the same as Wednesday. ETH, like BTC, hit a 3-month low on Tuesday. Tether’s stabilized USDT token deviated from its $1 peg early Thursday morning (ET) amid a sell-off on the popular Uniswap pool and Curve pool. USDT has fallen to the low of $0.9968, according to CoinMarketCap. Recently, the token traded at $0.999.
Riyad Carey, a researcher at digital asset data provider Kaiko, said in a tweet sent to AskFX: “It was definitely a time of great concern as a number of regulatory concerns have now coalesced into concerns about Tether.” The de-pegging has caused a major shake-up in the markets. This is because its dominance has increased significantly in recent months.
Carey said: “This is another consequence of falling liquidity; a key reason for the devaluation of its currency was the massive outflow from the Curve 3 pool.”
MATIC, a token of the Polygon smart contracts platform, has recently fallen more than 5% compared to other cryptos. Last week, the US Securities and Exchange Commission (SEC) listed MATIC as one of 19 cryptos in its lawsuit against Binance and Coinbase. The AskFX Market Index (a measure of how crypto markets are performing) is down nearly 3% recently.
Cryptos continued to decouple from US stocks, which rose on Thursday as investors gained confidence in encouraging economic indicators. This included a retail sales report in May that showed consumers have increased their spending on groceries and electronics, among other things. The data indicated that the economy was not headed for recession as feared. The Nasdaq Composite, which is heavily tech-biased, and the S&P 500 were both up 1.1% and 1.3%, respectively.
Vineeth BHUVANAGIRI, the managing director of EMURGO Fintech (a founding company of the Cardano blockchain), wrote in a Emailed AskFX that Bitcoin’s decline was expected in the current “crab” market.
He wrote, “After last year’s crash, BTC and major coins have seen huge gains since October.” “And looking ahead, we’re likely to range between October’s lows and April’s highs,” he wrote.
Crab markets are defined as conditions where prices fluctuate at a similar level over a period of time.
Bhuvanagiri has compared today’s market climate to that of 2019. The market was volatile back then. We had great highs, but also some lows. Crypto Twitter users went from mild euphoria to depression. “Then the DeFi summer of 2020 started and everything changed.”
He expressed caution about the uncertainty about rate hikes, slowing economic growth and potential challenges for the banking sector. This toxic combination could continue to destabilize crypto markets. He wrote: “It is not difficult to imagine a situation where markets would need to be reinvigorated.” or something.”
