Bitcoin and other cryptocurrencies saw a slight increase on Tuesday, although digital assets are still facing pressure due to the rise in bond yields. This comes as investors analyze the future of interest rates and the Federal Reserve’s monetary policy.
The price of Bitcoin has seen a modest gain of less than 1% in the past 24 hours, reaching $26,250. However, it remains at the lower end of a range that has persisted for over a month, marked by low volatility and trading activity. This decline started after the Fed’s recent decision on interest rates and the release of its economic projections, causing a surge in the value of the dollar and government bond yields.
Hani Abuagla, an analyst at broker XTB, observed that cryptocurrency market sentiment remains weak due to the decline in global stock markets, a strong dollar, and rising yields. These factors are creating pressure on risk assets such as cryptocurrencies.
Similar to the Dow Jones Industrial Average and S&P 500, Bitcoin is negatively affected by a strong dollar and high bond yields. With the US Treasuries offering higher returns and a more appealing greenback, investors have little motivation to take on riskier investments like Bitcoin. The recent surge in Treasury yields, reaching their highest levels in over a decade, has reinforced this sentiment as investors process the Fed’s indication that borrowing costs will likely remain higher than previously anticipated.
Macroeconomic Headwinds Weigh on Cryptos
The cryptocurrency market has been facing significant challenges in recent months, as macroeconomic headwinds and a lack of major catalysts have resulted in stagnation. Trading volumes have hit record lows, and the characteristic volatility that once attracted investors has dwindled.
Bitcoin’s Struggle Continues
Bitcoin, the flagship cryptocurrency, shows no signs of breaking out of its monotonous phase anytime soon. The Securities and Exchange Commission’s decision on spot Bitcoin exchange-traded funds is still months away, and the anticipated supply change known as halving will not occur until next year.
Matteo Greco, an analyst at digital asset investment group Fineqia, notes that despite the end of the summer season and expectations of increased trading activity, both centralized exchanges and on-chain digital asset market volumes remain low. This can be attributed to central bank policies, particularly those of the Federal Reserve, which have steered capital towards safer investments like government bonds.
Ether and Altcoins Show Mixed Performance
While Bitcoin struggles, other cryptocurrencies have seen varying degrees of success. Ether, the second-largest crypto, experienced a modest rise of less than 1%, reaching $1,590. Altcoins, including Cardano and Polygon, also posted gains, with the former climbing less than 1% and the latter surging more than 2%. On the other hand, memecoins like Dogecoin and Shiba Inu remained relatively stable, trading around flat levels.
In conclusion, the cryptocurrency market is currently facing headwinds from macroeconomic factors and a lack of major catalysts. Bitcoin’s stagnant performance is unlikely to change soon, while other cryptocurrencies show mixed results. It remains to be seen how the market will evolve in the coming months.
