The cryptocurrency market has been experiencing a major decline, with Bitcoin leading the way as it retreated to the $65,000 mark after failing to retest its its highest point of $73,700 reached in March.
Market expert Michael van de Poppe has shed light on the reasons behind this ongoing bloodbath, highlighting several key factors that have contributed to the current state of the market.
Crypto market fights uncertainties
A key event highlighted van de Poppe's is last Wednesday's release of Consumer Price Index (CPI) data, which has a major impact on the Federal Reserve's decision on interest rates.
The lower-than-expected data favored risk assets. A lower-than-expected headline CPI of 3.3% (vs. 3.4% expected) and core CPI of 3.4% (vs. 3.5% expected) pointed to a potential rate cuts or a positive outlook for future rate cuts, providing favorable market conditions.
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Another significant event was the publication of Producer Price Index (PPI) data, which provides inflation data from the producer's perspective. The data revealed a lower-than-expected regular PPI score of 2.2% (vs. 2.5% expected) and a year-over-year core PPI score of 2.3% (vs. 2.4% expected).
Furthermore, the monthly data They produced negative figures, further favoring risk assets. However, van de Poppe maintains that despite these positive indicators, the cryptocurrency market has continued its downward trend.
According to van de Poppe, the release of consumer confidence data on Friday also affected the market. Consumer sentiment is considered a market leader and an indicator of market strength or weakness. The data was lower than expected, with a score of 65.6 (vs. 72.1 expected).
This data pointed to a lack of economic strength, which could fuel bullish sentiments for risk assets and a shift towards crypto-native markets.
However, Federal Reserve Chairman Jerome Powell gave an unexpectedly hawkish speech. Although the data points towards the need for rate cuts and worsening economic conditionsPowell maintained a hawkish tone and reviewed possible rate cuts in 2024.
According to Michael van de Poppe, these prospects did not bode well for the markets, adding to the existing uncertainties and the notorious price volatility observed in recent days.
Bitcoin Price Struggle Continues as Bond Yields Fall
The analyst further noted that market indicators, such as Treasury bond yields, declined. the 2 years Treasury Bond Yields fell to the lowest point in two months, while the 10-year yield continued its decline to the lowest point since early April.
These indicators typically suggest favorable conditions for Bitcoin and risk assets, implying a higher likelihood of a potential rate cut. However, the strength of the US dollar persisted due to the rate cut by the European Central Bank (ECB).
Van de Poppe believes that this unexpected strength of the dollar, driven by the actions of the ECB, further complicated the market dynamicsas rate cuts are often necessary for economic stability.
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In short, the cryptocurrency market, particularly Bitcoin, has declined substantially as it struggles to regain its previous highs. Even though positive economic data points towards possible rate cuts and market indicators favor risk assets, the market has not responded positively.
Current uncertainties surrounding events such as the Ethereum ETF listing have contributed to the market weakness. With rate cuts on the horizon and dollar strength persisting, the next few weeks will likely be critical in determining market direction.
As of this writing, Bitcoin was trading at $65,280, down 2% in the last 24 hours and down more than 5% in the last seven days.
Featured image of DALL-E, chart from TradingView.com
