Bitcoin Approaching $27,000, Down 9% for the Week
Bitcoin’s price has dropped significantly over the past week caused of macroeconomic fears and the Fed’s hawkish stance.
According to data from CoinGecko, Bitcoin’s downtrend continues to bite, with the cryptocurrency currently trading around $27,500, down more than 9% in the past week.
The drop in BTC erased early April gains above $30,000, moving below the previous month’s closing value of around $28,500.
Other leading cryptocurrencies also declined over the past week, with most of the 10 largest cryptocurrencies by market capitalization, except stablecoins, dropping by double digits on the week.
A strengthening U.S. dollar drove the decline as the U.S. Central Bank is expected to raise the benchmark interest rate by another quarter basis point at the upcoming May policy rate meeting. A higher-yielding dollar makes non-yielding assets such as cryptocurrencies and gold less attractive.
Lately, Bitcoin has had a stronger correlation with gold than with stock market indexes, according to data from Valkyrie Fund, especially after the collapse of Silicon Valley Bank, which triggered fears of bank failures.
Over the past 6 months, Bitcoin’s correlation with the S&P 500 and Nasdaq has decreased considerably. Correlations with Gold were also diminishing over the same time period until the SVB collapse and US gov intervention as reported by Valkyrie (@ValkyrieFunds) on April 19, 2023
Another factor supposedly brewing in the US economy is the debt ceiling crisis. The U.S. Treasury has historic amounts of debt; current debt exceeds the $31.4 trillion debt limit, with about $31.46 trillion already borrowed.
The U.S. Treasury debt ceiling is the maximum amount of debt the U.S. government can borrow to meet its financial obligations. Congress determines the debt ceiling, and a majority vote can change it.
Failure to raise the debt could lead to an economic crisis in the U.S. as the government will delay interest payments on U.S. Treasury bonds. Market apprehension was evident as the value of credit default swap contracts to bet against the U.S. dollar soared to 2008 levels.
Believing in a Rise in the Cryptocurrency Market
While some Bitcoin advocates believe that the price of Bitcoin could rise if confidence in the U.S. economy falters, the knee-jerk reaction of a global economic crisis has created much uncertainty in the markets.
In this sense, memecoins has also suffered a drop on Sunday amid a broader market decline that saw Bitcoin fail to regain the $28,000 level, fueling bearish sentiments in the market.
The frog-themed PEPE token, which saw one lucky buyer turn a $250 investment into a paper profit of more than $1 million, has lost 30% of its value since its April 20 peak and is down 13% on the day, according to CoinGecko.
Low liquidity conditions have also been instrumental in moving markets with relatively small order sizes. Last week, two April 20 sell orders worth $5.97 million triggered a bearish breakout in the Bitcoin price, according to Riyad Carey, a researcher at Kaiko Data.
In a tweet, Carey highlighted the dangers of “thin order books” and low liquidity conditions causing significant drops, due to orders of magnitude around 199.2 BTC, worth around $5.97 million, with BTC at $30,000.
Thin order books mean that there are relatively fewer buy and sell orders around the market trading price, making it easier for high-volume traders to move prices in both directions.
By Marina Meza
