Bitcoin (BTC) is currently down 5.09%, trading at $35,686.47, just days after breaking the $40,000 level. The downturn did not just affect Bitcoin and the cryptocurrency market alone. The stock market and commodities were not left out of the selloff which resulted from Federal Reserve Chair, Jerome Powell’s comments related to future interest rate hikes and concerns over rising inflation. The comments led to major declines in both the cryptocurrency and commodity market, particularly Gold.
Nairametrics earlier reported that Gold had fallen below the $1,800 mark, dropping over $130 since the beginning of this month after hitting a high of $1,916, which has not been touched since January 2021. This crash was also caused by the same Federal Open Market Committee (FOMC) report.
READ: Bank of Japan governor calls Bitcoin a speculative asset
Reasons for the decline in Bitcoin
First is the FOMC report. The Fed took a surprisingly aggressive tone as it handed down the decision yesterday. Out of 18 Fed officials, 11 forecasts at least two quarter-point interest rate increases for 2023 which is a sign that the central bank has begun asset tapering discussions. This boosted the dollar index which in turn gave strength to the dollar, which ultimately caused a decline in Bitcoin and the entire cryptocurrency market.
With the market already selling off as a result of the heat from the FOMC report, investors lost confidence in the market, thereby increasing the momentum of exchange inflows in cryptocurrencies like Bitcoin which ultimately brought about the decline in the market like we saw in the commodity market.
READ: South Korea delists high-risk cryptocurrencies
Source: CryptoQuant
As seen above, Bitcoin’s price decline was also perpetrated by increased inflows to spot exchanges which led some analysts to speculate that traders who failed to cash out near the high are taking advantage of lower highs to lock in gains. As the sell-off intensified as a result of the FOMC report, the NetFlow of BTC into exchanges saw noticeable selling pressure, which kept Bitcoin pinned below $36,000.
READ: U.S Comptroller of the Currency, Michael Hsu wants to set a “regulatory perimeter” for cryptos
What this means
As Bitcoin failed to retake the $40,000 trading zone, investors need to keep a close eye on on-chain analytics which will point to where investor sentiments will be heading. So far, some analytics are showing bullish signs as whale wallets holding between 100 BTC and 10,000 BTC have increased their holdings by 90,000 BTC over the past 25 days, suggesting a more positive long-term outlook. The investors also need to be aware that MicroStrategy will be pumping the Bitcoin market by injecting a fresh $488 million which is also another bullish indicator.
