Crypto sinks with stocks on economic uncertainty
Bitcoin’s summer slump continues, with prices falling below $32K as post-pandemic inflation fears wash over the cryptocurrency market.
The U.S. Labor Department released data last week showing that U.S. consumer prices spiked beyond expectations in June. Major stock indices started falling shortly afterwards, and Bitcoin — already feeling jittery about the impact of GBTC shares unlocking — followed stocks down.
At the end of the week, Bitcoin was down 5%, while Ethereum had fallen 7%. Many altcoins dropped even further, with Dogecoin down 15% on the week and DeFi tokens Aave and Uniswap showing similar losses.
This Week’s Highlights
- Institutions lend support to crypto
- Inflation spike fails to buoy Bitcoin
Institutions lend support to crypto
Amidst the falling prices and downtrodden sentiment, Google searches for “Bitcoin price” have dropped to the lowest level since December. Big financial players, however, are continuing to lend support to the crypto market.
PayPal announced that last week that buying limits have been lifted to allow weekly crypto purchases of up to $100K; Visa announced the issuance of a new physical Bitcoin Debit card in Australia; and Bank of America, the second-largest bank in the U.S. is reported to have approved trading in BTC futures.
Inflation spike fails to buoy Bitcoin
Testifying before Congress last week, Federal Reserve chairman Jerome Powell admitted that U.S. inflation levels were above what the Fed was hoping to see, and “and will likely remain elevated in coming months.”
Given that U.S. inflation is already the highest it’s been in thirteen years, one might expect Bitcoin to rise to the occasion as digital gold and fulfil its role as an inflation hedge.
However, the market appears to be pricing in the possibility of policies that limit inflation, which could potentially put an end to the exuberant crypto and stock market rallies widely thought to have been boosted by quantitative easing.
After two weeks of falling prices, Bitcoin is now sitting at the bottom of the range. Traders are likely to be expecting either a resurgence from here, or accelerated selling as the floor gives way. In the week ahead, two events could spark a trendsetting move.
On Monday, U.S. Treasury Secretary Janet Yellen will meet with the President’s Working Group on Financial Markets to discuss stablecoins, and then on Wednesday, Elon Musk is scheduled to talk Bitcoin with Twitter founder Jack Dorsey and ARK Invest’s Cathie Wood. Depending on how the conversation progresses, the price of Bitcoin (and Dogecoin) could see major volatility.