The price of Bitcoin decreased for the fourth consecutive trading session amid a widespread wave of heavy selling of cryptocurrencies. This selling trend goes against recent record highs achieved by global stocks.
The price of the largest cryptocurrency by market value fell 8.1% to its lowest level since February, trading at approximately $54,400 at 7:20 a.m. Friday in London. Meanwhile, prices of smaller cryptocurrencies such as Ethereum, Coronado, and XRP struggled to recover from their losses.
Currently, cryptocurrency speculators are facing a number of challenges, including weak demand for Bitcoin ETFs in the United States, signs of governments disposing of confiscated coins, and political volatility in America.
Additionally, the bankruptcy administrators of the troubled cryptocurrency exchange Mt. Gox are returning a large portion of Bitcoin to creditors in stages.
Speculators remain uncertain about the ultimate amount of the $8 billion in digital assets that will be sold. On Friday, a wallet associated with Mt. Gox moved $2.7 billion worth of cryptocurrency, according to analytics platform Arkham Intelligence.
The correlation between stocks and cryptocurrencies is declining.
Concurrently, the MSCI World Equity Index is hovering near a record high, and the 30-day short-term correlation between Bitcoin and the index is decreasing. The current question is whether the risk-off situation in crypto is a one-time event or a potential indicator of a cautious quarter in traditional investments as well, following a strong performance in stocks during the first half of this year.
“There is a general lack of momentum in the crypto markets at the moment,” said Stefan von Heinisch, head of trading at OSL SG. “Most of the news circulating currently, such as Mt. Gox selling (digital assets), is bearish in nature.”
Von Heinisch indicated that the cryptocurrency market requires more signals regarding accommodative monetary policy from the ECB.US Federal Reserve“One or two rate cuts, coupled with an increase in the Fed’s balance sheet, will be crucial elements for the crypto market to anticipate,” he added.
Ethereum Fund Approvals Under Consideration
Investors await U.S. jobs data due later Friday to gather insights on the Federal Reserve’s monetary policy outlook. Recent weak economic data has increased the likelihood of an easing of the central bank US monetary policy in the coming months.
Driven by surprisingly strong demand for the launch of cryptocurrency exchange-traded funds in the United States, Bitcoin reached an all-time high of $73,798 in March. However, investment has since declined, leading to a drop in bitcoin’s price and casting a shadow over the rest of the digital asset market.
Approvals for the launch of ETFs for Ether, the world’s second-largest cryptocurrency, are under consideration, but interest in these products might vary if the sell-off in cryptocurrencies continues.
Bitcoin Price Plunges for Fourth Straight Session Amidst Crypto Sell-Off
The price of Bitcoin has tumbled for the fourth consecutive trading session, falling 8.1% to its lowest level since February, trading at around $54,400 as of 7:20 a.m. Friday in London. This decline comes amid a widespread wave of heavy selling in the cryptocurrency market, a stark contrast to the recent record highs achieved by global stocks.
The largest cryptocurrency by market value is facing several challenges, including weak demand for Bitcoin ETFs in the United States, indications that governments are divesting confiscated coins, and a volatile political landscape in America.
The Impact of Mt. Gox Bankruptcy
Adding to the downward pressure is the ongoing Bitcoin return to creditors by the bankruptcy administrators of the troubled cryptocurrency exchange Mt. Gox. The administrators are returning a large portion of Bitcoin to creditors in stages, leaving speculators unsure about the ultimate impact on the market. A wallet linked to Mt. Gox moved $2.7 billion worth of cryptocurrency on Friday, according to analytics platform Arkham Intelligence, raising concerns about the potential selling pressure.
Declining Correlation between Stocks and Cryptocurrencies
While global stocks continue their upward climb, with the MSCI World Equity Index hovering near a record high, the correlation between Bitcoin and the index is weakening. The 30-day short-term correlation between the two assets is declining, sparking questions about whether the crypto sell-off is a temporary event or a sign of a cautious quarter ahead for traditional investments following a strong first half of the year for stocks.
“There is a general lack of momentum in the crypto markets at the moment,” said Stefan von Heinisch, head of trading at OSL SG. “Most of the news that is circulating at the moment, such as Mt. Gox selling (digital assets), is of a bearish nature.”
Monetary Policy Outlook and Ethereum ETFs
Von Heinisch highlighted the need for more signals of accommodative monetary policy from the European Central Bank (ECB) and the US Federal Reserve (Fed). “One or two rate cuts, coupled with an increase in the Fed’s balance sheet, will be key elements for the crypto market to look forward to,” he added.
Investors are awaiting the release of US jobs data later Friday for further insights into the Federal Reserve’s monetary policy outlook. A recent string of weak economic data has increased the likelihood of an easing of US monetary policy in the coming months.
The launch of Ethereum exchange-traded funds (ETFs) in the United States is under consideration, but investor interest in these products could dwindle if the cryptocurrency sell-off continues.
Challenges Facing the Cryptocurrency Market
The cryptocurrency market is facing a confluence of challenges, including:
- Weak demand for Bitcoin ETFs
- Government divestment of confiscated coins
- Political volatility in America
- The ongoing return of Bitcoin to creditors by Mt. Gox bankruptcy administrators
- Uncertainty surrounding the potential selling pressure from the released Bitcoin.
- A declining correlation between Bitcoin and global stock markets.
- A lack of clarity about the future of monetary policy in major economies.
Looking Ahead
The recent decline in Bitcoin prices and the broader cryptocurrency market sell-off highlight the volatility inherent in this asset class. While the impact of Mt. Gox’s Bitcoin return is still unfolding, the broader market sentiment remains cautious. Investors will be watching closely for signs of a rebound or for further downward pressure in the coming weeks.
The potential adoption of Ethereum ETFs could provide a boost to the cryptocurrency market, but only if the current sell-off is reversed. The cryptocurrency market is likely to remain volatile in the near term, subject to macro-economic factors, regulatory developments, and investor sentiment.