In a stark reflection of prevailing risk aversion, Bitcoin, the pioneering cryptocurrency, stumbled to a nearly two-month low, echoing the broader downward trend in the digital asset market which was further exacerbated by surging global government bond yields, reaching their loftiest point in around 15 years.
Edward Moya, an authoritative voice as the senior market analyst at Oanda, highlighted the synergy between the bond market’s dynamics and Bitcoin’s price trajectory. Moya noted, “When you throw in what is happening in the bond market, it becomes easy for Bitcoin prices to soften. If risk aversion becomes the dominant theme on Wall Street, Bitcoin’s bearish momentum could target the $27,200 level.”
The most substantial cryptocurrency by market capitalization bore the brunt of this sentiment, plunging by a notable 4.3% to reach $27,699. The losses only deepened as Bitcoin slipped below the $28,000 threshold for the first time since June 20. This descent marked the most significant intraday decline since July 14.
The progressive decline in Bitcoin’s value over recent weeks has effectively obliterated approximately half of the gains accrued following BlackRock’s surprise filing for a Bitcoin ETF on June 15. Having surged by an impressive 72% in the first quarter, Bitcoin has subsequently undergone a 2% decline since the close of March. A haunting echo of the tumultuous past, the token experienced a 64% tumble in the previous year amidst a sequence of industry upheavals and insolvencies.
Michael Safai, a partner at the quantitative trading firm Dexterity Capital, encapsulated the prevailing mood succinctly: “There aren’t enough good headlines coming out of crypto to get people excited. Conversely, rising interest rates and weakened risk appetite are pushing non-crypto-native traders towards safer assets.”
The downturn didn’t spare other cryptocurrencies, as Ether experienced a similar dip of about 4%. Tokens linked to Cardano and Solana also pared their earlier gains.
The surge in global yields occurs in tandem with robust economic data, challenging the prevailing assumption of central bank rates hitting their zenith. Elevated interest rates inherently erode the allure of alternative investments, cryptocurrencies included.
This slump in Bitcoin follows a period of months during which the cryptocurrency maintained a narrow trading range. Metrics gauging the price volatility of the original cryptocurrency have demonstrated a downward trend, with the 90-day volatility touching its lowest point since 2016 this week, according to Bloomberg’s data.
Shiliang Tang, Chief Investment Officer at crypto investment firm LedgerPrime, underscored the week’s lack of optimism and resolution. Tang observed, “There was optimism earlier in the week that a resolution to the Grayscale Bitcoin ETF would come this week, but that passed with nothing coming out. Furthermore, traditional markets have been weak all week with SPX and tech selling off, 10-year rates reaching highs and the dollar catching a bid, and China credit and econ data weakness, all of which are negatives for risk assets.”
In summary, Bitcoin’s descent to a near two-month nadir reflects the prevailing downtrend within the digital asset market. This decline of Bitcoin was significantly amplified by the simultaneous surge in worldwide government bond yields, attaining their highest level in approximately 15 years. As Bitcoin navigates through this turbulent phase, its value remains intricately intertwined with the global economic landscape, bond market dynamics, and broader risk sentiment on Wall Street. Investors and enthusiasts alike remain vigilant for any potential catalysts that might rejuvenate the market’s appetite for cryptocurrencies.
Source: Bloomberg
