Bitcoin Wednesday reversed the new year’s bull run as investors weighed the Federal Reserve’s policy outlook and remained alert for updates on the Securities and Exchange Commission’s impending Bitcoin exchange-traded fund decision.
Bitcoin price last fell more than 4% to $42,685.85, according to Coin Metrics. It fell as much as 6% earlier in the day, recouping almost all of its gains from Tuesday, when it rose to $45,913.30, its highest since April 2022.
ether fell more than 6% to $2,221.27, with other coins suffering even greater losses. Solana 7% decrease, Ripple XRP Although it fell by 6%, litecoin and dogecoin They fell 10% and 9%, respectively.
Investors expressed concern that the SEC would not approve ETFs this year, as Bitcoin bulls expected.
Noel Acheson, an economist and author of the newsletter “Crypto is Macro Now,” said the uncertainty “caused anxiety among short-term traders, especially as leverage was rising rapidly, leading them to exit long positions.” I did,” he said.
Bitcoin fell on Wednesday after rising strongly the previous day.
Bernstein dismissed those concerns in a memo released late Wednesday morning.
Bernstein analyst Gautam Chughani said: “We continue to argue that every ETF price drop is an opportunity for the market to buy Bitcoin/Bitcoin miners, and the market is not looking for an actual confirmation event ( “There is a strong possibility that there will be a significant rebound starting next weekend,” he said.
Darius Tabatabai, co-founder of decentralized exchange Vertex Protocol, said the cryptocurrency market is overheating, with Bitcoin prices now in their seventh month of rise.
“Warning lights were flashing when we saw spot appreciation and funding rate increases over the holiday period,” he said. “High leveraged prices in a thin market are generally not a good way to create stability, and today’s washout looks relatively healthy.”
According to CryptoQuant, Bitcoin funding rates (fees set by exchanges to maintain a balance between derivative contract prices and asset prices) reached their highest level since October 2021 at the end of December. The history of Bitcoin funding rates dates back to 2016.
Elsewhere, Richmond Fed President Thomas Barkin on Wednesday said he expected a soft landing, but warned that raising interest rates was still “on the table.” Minutes of the Fed’s latest meeting then echoed the warning that policymakers “reaffirmed that it is appropriate for policy to maintain a suppressive stance for some time,” depending on inflation conditions. , indicating that the path to lowering interest rates is unclear.
”[Today’s] “Bitcoin price action is now turning into a macro trade: stocks, bonds and gold are weakening, and the dollar is strengthening,” said Zach Pandle, director of research at Grayscale Investments.
January wasn’t a particularly strong month for Bitcoin. According to CoinGlass, May has ended in green for the past 11 years.
Ahead of the new year’s rally, Bitcoin ended a three-week period of decline, ending December up 12%. The cryptocurrency benchmark more than doubled in 2023, soaring 157%.
—CNBC’s Jeff Cox and Michael Bloom contributed reporting.
Don’t miss the next story from CNBC PRO.
