The cryptocurrency market is experiencing a significant downturn, with Bitcoin leading the way, retreating to the $65,000 level after failing to retest its value. highest ever in March it reached $73,700.
Market expert Michael van de Poppe shed airy on the causes of the ongoing carnage, highlighting several key factors that have contributed to the current state of the market.
The cryptocurrency market is struggling with uncertainty
Key event highlighted van de Poppe is Wednesday’s release of Consumer Price Index (CPI) data, which has a significant impact on the Federal Reserve’s decision on interest rates.
The data, which came lower than expected, supported risky assets. Lower than expected core CPI of 3.3% (vs. expected 3.4%) and core CPI of 3.4% (vs. expected 3.5%) indicated potential interest rate cuts or positive prospects for future interest rate cuts, providing favorable market conditions.
Another critical event was the publication of data on the Producer Price Index (PPI), which provides inflation data from the producer’s perspective. The data revealed a lower-than-expected regular PPI result of 2.2% (vs. expected 2.5%) and Core PPI Y/Y result of 2.3% (vs. expected 2.4%).
Additionally, monthly data showed negative values, which further favored risky assets. However, van de Poppe says that despite these positive indicators, the cryptocurrency market continues its downward trend.
According to van de Poppe, Friday’s publication of consumer sentiment data also had an impact on the market. Consumer sentiment is considered a market leader and a measure of market strength or weakness. The data was lower than expected, with a result of 65.6 (vs. expected 72.1).
The data signaled a lack of economic strength, potentially fueling bullish sentiment in risk assets and a shift towards native cryptocurrency markets.
However, Federal Reserve Chairman Jerome Powell delivered an unexpectedly hawkish speech. Despite data indicating the need to reduce interest rates and deteriorating economic conditionsPowell maintained a hawkish tone and revised potential rate cuts in 2024.
According to Michael van de Poppe, these prospects did not bode well for the markets, deepening the existing uncertainty and notorious price volatility observed in recent days.
The battle for Bitcoin’s price continues as bond yields decline
The analyst further noted that market indicators such as Treasury yields have declined. 2 years aged Yield of treasury bonds fell to its lowest level in two months, while the 10-year bond yield continued its decline to its lowest level since early April.
These indicators typically suggest favorable conditions for Bitcoin and risk assets, meaning a greater likelihood of a potential interest rate cut. However, the strength of the US dollar remained thanks to the interest rate cut by the European Central Bank (ECB).
Van de poppe believes that this unexpected strength in the dollar, resulting from the actions of the ECB, has further complicated the situation market dynamicsbecause rate cuts are usually necessary for economic stability.
In summary, the cryptocurrency market, particularly Bitcoin, has dropped significantly as it tries to regain its previous highs. Despite positive economic data pointing to potential interest rate cuts and market indicators favoring risky assets, the market did not respond positively.
Continued uncertainty surrounding events such as the Ethereum ETF listing has contributed to market weakness. With interest rate cuts on the horizon and the continued strength of the dollar, the coming weeks are likely to be crucial in determining the direction of the market.
At the time of writing, Bitcoin is trading at $65,280, down 2% in the last 24 hours and over 5% in the last seven days.
Featured image from DALL-E, chart from TradingView.com
