Last week saw major declines in the cryptocurrency market, with overall valuations falling 20% and bitcoin by 5%.
This change came amid macroeconomic data and global financial indicators that contributed to the bearish sentiment.
Crypto market reaction to macroeconomic indicators
Crypto analyst Michael van de Poppe explained the situation happening in the market and said that despite the 20% drop in the total market capitalization, things in the market are not as bad as they seem. As van de Poppe noted, this correction could be forming a “higher low,” meaning the overall uptrend remains intact.
A "higher low" is a bullish signal indicating that the market could be regaining its mojo even after a pullback. This pattern may indicate that investors are still optimistic about the future and are buying into the market at these lower prices in anticipation of future gains.
The release of recent data that has provided a rather mixed picture of the economic environment has been cited as the reason for this market trend. The consumer price index (CPI), a key indicator used by the Federal Reserve in policymaking, rose 3.3%, close to the 3.4% expected.
Likewise, the core CPI, which excludes food and energy, stood at 3.4%, slightly below the projected 3.5%. These figures indicate a slowdown in inflation rates, which is generally good for risk assets like cryptocurrencies as they can lead to a reduction in interest rates.
Furthermore, the Producer Price Index (PPI) also reflected this trend, placing the global figure at 2.2% compared to the expected 2.5%. The year-over-year underlying PPI was 2.3%, lower than the 2.4% expected. The monthly figures also contracted, something that should normally bolster market confidence and the cryptocurrency market did not do the same.
Federal Reserve Policies
He Federal ReserveThe position of is a fundamental factor in the current dynamics of the market. Federal Reserve Chairman Jerome Powell delivered a surprisingly hawkish speech despite the weaker inflation data.
Powell's statements and the change in projected rate cuts for 2024 indicate that the FED is not likely to be as aggressive as the market anticipates in easing monetary policy. This has led to a paradox where, due to lower inflation figures that should theoretically allow for rate cuts, the Fed's cautious approach may negatively impact the market.
Additionally, Treasury yields have been quite volatile; Two-year bond yields fell sharply, hitting a two-month low of 4,694%. While these are generally bullish signs for risk assets like Bitcoin, the strength of the dollar, fueled by recent ECB rate cuts, has put pressure on cryptocurrencies.
Gold rises as Bitcoin struggles
Unlike cryptocurrencies, gold has seen bullish momentum, further highlighting the divergence in asset performance under similar economic conditions. The resistance of gold, often seen as a safe haven asset, may be driving investors away from cryptocurrencies, which are still perceived as more speculative investments.
Meanwhile, Bitcoin (BTC) has seen a bearish rally over the past week, falling 5% from an intraweek high of $70,059 to a weekly low of $65,267. At the close of this edition. BTC was trading at $66,320, down 1.29% from the 24-hour high.
Source: CoinMarketCap
Major cryptocurrencies have also fallen. He XRP price, for example, has seen a 2% drop in the last 7 days. However, XRP corrected this allowing the bulls to take control of the market and thus a 1.94% rally to trade at $0.4846 at the time of writing.
The lack of momentum in crypto markets may also be related to regulatory uncertainties, such as the pending decision on the Ethereum ETF. This has left investors cautious, contributing to bearish pressure.
However, bullish momentum has been rekindled in the ETH market with the updated timeline for a Ethereum Spot ETF before July 2. At press time, Ethereum (ETH) price was trading at $66,269, up 2.47% from the 24-hour low of $3,364.
The content presented may include the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.
✓ Share: