The cryptocurrency market has suffered a significant decline, with Bitcoin leading the way by returning to the $65,000 mark after failing to retest its value. highest ever of $73,700 reached in March.
Market expert Michael van de Poppe has shed light on the reasons behind this ongoing carnage, highlighting several key factors that have contributed to the current state of the market.
Crypto market fights against uncertainties
A key event marked by van de Poppe is last Wednesday’s release of consumer price index (CPI) data, which has a major impact on the Federal Reserve’s interest rate decision.
The figures, which were lower than expected, favored risky investments. A lower-than-expected headline CPI of 3.3% (vs. 3.4% expected) and core CPI of 3.4% (vs. 3.5% expected) indicated potential interest rate cuts or positive prospects for future interest rate cuts, creating favorable market conditions.
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Another key event was the release of the Producer Price Index (PPI) data, which provides inflation data from the producer’s perspective. The data showed a lower than expected Regular PPI score of 2.2% (vs. an expected 2.5%) and a Core PPI Y/Y score of 2.3% (vs. an expected 2.4%).
Moreover, the monthly data showed negative numbers, further favoring risky assets. However, Van de Poppe claims that the crypto market has continued its downward trend despite these positive indicators.
According to van de Poppe, the publication of consumer confidence figures on Friday also had consequences for the market. Consumer sentiment is considered a market leader and a gauge of market strength or weakness. The data came in lower than expected, with a score of 65.6 (versus an expected 72.1).
This data indicated a lack of economic strength, which could potentially fuel bullish sentiment for risky assets and a shift toward crypto-native markets.
However, Federal Reserve Chairman Jerome Powell gave an unexpectedly aggressive speech. Despite data pointing to the need for interest rate cuts deteriorating economic conditionsPowell maintained an hawkish tone and revised possible rate cuts in 2024.
According to Michael van de Poppe, this outlook did not bode well for the markets, adding to the existing uncertainties and the infamous price volatility of recent days.
Bitcoin Price’s Struggle Continues as Bond Yields Fall
The analyst further pointed out that market indicators such as government bond yields fell. The 2 year old Return on government bonds fell to a two-month low, while the 10-year yield continued to fall to the lowest since early April.
These indicators generally indicate favorable conditions for Bitcoin and risky assets, implying a higher probability of a possible interest rate cut. However, the strength of the US dollar continued due to the interest rate cut by the European Central Bank (ECB).
Van de Poppe believes that this unexpected strength of the dollar, driven by the ECB’s actions, has further complicated the situation market dynamicsas interest rate cuts are generally necessary for economic stability.
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In short, the cryptocurrency market, especially Bitcoin, has fallen significantly as it struggles to regain its previous highs. Despite positive economic data pointing to possible interest rate cuts and market indicators favoring risky investments, the market has not responded positively.
The continued uncertainties surrounding events such as the listing of the Ethereum ETF have contributed to the market’s weakness. With rate cuts on the horizon and the dollar’s strength continuing, the coming weeks are likely to be critical in determining the direction of the market.
As I wrote this, Bitcoin was trading at $65,280, down 2% in the past 24 hours and more than 5% in the past seven days.
Featured image of DALL-E, chart from TradingView.com
