Bitcoin prices have largely managed to stay afloat above $40,000 after a recent selloff.
DreamstimeBitcoin and other cryptocurrencies were steadying on Wednesday, with digital assets remaining under pressure from a shifting monetary policy environment but not recording any significant losses beyond a selloff seen earlier in the week.
Bitcoin was around flat over the past 24 hours and holding around the $40,100 level. The price of the leading digital asset notched its biggest daily decline since February on Monday, coming down from above $42,000 and slipping below $39,400 at points on Tuesday.
“After a rough start of the week, bitcoin rebounded,” said Yuya Hasegawa, an analyst at crypto exchange Bitbank.
Smaller peer ether was near 1% higher to around $3,050. The token underpinning the Ethereum blockchain network topped $3,500 early last week and saw its biggest daily fall since January on Monday.
Price action was similar among smaller cryptocurrencies, or altcoins. Solana was just above flat and cardano was 0.5% into the green, with luna up 0.5%.
So-called memecoins—called that because they were initially intended as internet jokes rather than significant blockchain projects—exhibited much of the same. Dogecoin was 1% higher and shiba inu was little changed in recent trading, though it was up 20% over the past day, having surged late Tuesday after trading platform Robinhood Markets (ticker: HOOD) listed the token.
Bitcoin and other digital assets have come under pressure in recent weeks from macro trends in wider markets. Investors are bracing for an aggressive shift in monetary policy from the Federal Reserve, with markets expecting the central bank to raise interest rates many times this year and next as it battles historically-high inflation.
While cryptos should theoretically trade independently of mainstream financial markets, they have proved to be correlated with other risk-sensitive assets, like tech stocks.
If the Fed ramps up interest rates and increases borrowing costs, it would dent economic demand and likely dampen investor sentiment towards riskier assets, including cryptos. An associated rise in bond yields also decreases the extra return investors expect to get between safer bets on bonds and riskier bets on the likes of equities and digital assets.
However, inflation data released Tuesday provided markets with some sense of stability. U.S. consumer-price index (CPI) data showed inflation rose 8.5% in March on an annual basis to a new 40-year high. However, a core measure of CPI actually fell short of Wall Street’s expectations.
It hasn’t changed expectations that the Fed will raise rates by a sizable 50 basis points at its next meeting, but the data does indicate that markets may now be seeing inflation at its peak. But these pressures on bitcoin and its peers aren’t going away.
“The strong risk off sentiment continues as some of the Fed members have unanimously voiced the need for fast and tighter monetary policy to counter high inflation,” said Hasegawa. “I expect the high inflation numbers and inflation expectations will likely keep the price of bitcoin afloat above the critical upward trend line, which runs through January low and February low.”
Write to Jack Denton at jack.dentondowjones.com
Hot
-THE END-