Cryptocurrencies continued to show an unexpected level of resilience on Tuesday, as Bitcoin (BTC) bears made another attempt to crash its price down, but were forcefully rebuffed by bulls, who were supported by large inflows into ETFs. Bitcoin (BTC) spot to maintain high demand.
A hotter-than-expected CPI reading fell just after markets opened and briefly depressed asset prices, but investors quickly shrugged off the report and concerns about interest rates to push stocks higher.
While the major indexes are still below their recent record highs, the S&P, Dow Jones, and Nasdaq indexes ended the day higher, up 1.12%, 0.61%, and 1.54%, respectively.
Data provided by TradingView shows that after holding above $72,000 in the early hours of Tuesday, the CPI led to an uptick in Bitcoin volatility that briefly saw the top cryptocurrency touch a new high of $73,040 on Coinbase before sliding. To a daily low of $68,615 on the Coinbase exchange. afternoon.
Bitcoin/US Dollar Chart by TradingView
Low buyers were quick to pounce on the 6% intraday price swing, and their efforts helped push Bitcoin back above $70,830 at the time of writing, down 1.9% on the 24-hour chart.
Bitcoin is seen as a hedge against inflation
While higher-than-expected CPI readings and unexpected strength in the jobs market have traditionally weighed on cryptocurrency prices, Bitcoin strength and continued inflows into spot Bitcoin ETFs are adding a new level of stability to the cryptocurrency market, which bodes well. . For the long-term outlook for this bull cycle.
“In the past, CPI data and interest rate cuts have played a more important role in cryptocurrency price movements, but if there is a question as to whether the expectation of interest rate cuts played a role in the recent bull run, I don’t think so,” said Greg Magadini, Director Derivatives, in a note shared with Kitco Crypto, “are fine now.”
“Cryptocurrencies really move on their own factors,” he added. “The discount rate for interest rates doesn't really matter. The basis for Bitcoin futures right now is 25% per annum for long leveraged positions. This suggests that investors are willing to pay a significant premium for leveraged long positions, and so traders who are eager To Bitcoin right now they don't really care if the risk free interest rate is 5% versus 5.25%.
These expectations were confirmed by Aurélie Barthier, Principal Research Analyst at Nansen.ai, who told Kito Crypto that a higher-than-expected inflation reading should not put an end to Bitcoin's rally because even without a Fed rate cut, drivers like institutions will continue Demand is pushing top cryptocurrencies to new highs.
“Regarding the short-term impact of today’s US CPI release, we do not expect the crypto bull market to end yet, or to significantly impact prices in the coming weeks,” Barthier said. “There is a lot of bullish momentum in cryptocurrencies (price and news flow, see latest announcements on BlackRock allocating its BTC ETF to two of its asset management funds).
“What will likely happen is a repricing of the expected Fed rate cuts: currently, futures markets have 4 rate cuts by December 2024; this should be reduced to 2-3 rate cuts (will be updated) FOMC meeting forecast this month and we expect an average of 2-3 interest rate cuts in FY2024).” “We do not expect a major sell-off in crypto as this repricing has occurred in the past few months without calling into question the bull market (consolidation vs. sell-off The big one)”.
She added: “Interestingly, gold fell by only 1%, and US two-year bond yields rose by 5 basis points since the CPI revelation.”
Persistent high inflation makes Bitcoin more attractive to investors looking to make the value of their assets keep up with or exceed rising costs of living, said Bill Zilk, chief revenue officer and chief marketing officer at BitPay.
“At a macroeconomic level, concerns about inflation persist, and with the Fed being more cautious in cutting interest rates, investors looking for growth and diversification are adding digital assets to their holdings,” he said. “With the recent approval, launch and development of several Bitcoin ETFs, investors are taking cryptocurrencies seriously again, thanks to institutional participation in the asset class.”
“Bitcoin, in particular, is emerging as a hedge against inflation, and growing economic uncertainty is prompting investors to seek protection in digital assets,” Zilk said. “We will continue to see cryptocurrencies reinsert themselves into the conversation as markets search for long-term stability.”
“The other thing to keep an eye on is the upcoming halving event in April,” he added. “Bitcoin halving will limit the supply of newly minted bitcoins, making the digital currency more scarce and pushing prices historically higher.”
“The surge in Bitcoin prices is not only catching the attention of investors – long-time holders are also looking for ways to cash in on their gains,” he concluded. “We are seeing an impact from the current uptrend, with interest in crypto spending up more than 25%.”
“The investment landscape is witnessing a profound global shift toward cryptocurrencies, especially Bitcoin, as a viable asset class,” said Matt Ballensweg, Managing Director and Head of Go Network at BitGo. “The emergence of nine new Bitcoin ETFs signals a sea change in portfolio construction, with institutional investment managers and advisors now almost forced to consider the impact of adding Bitcoin to a standard 60/40 portfolio.”
“While acknowledging potential withdrawals, the broader trajectory points toward a generational shift in investment strategies, with different routes available to access the market, each with different considerations,” Ballensvig said.
Mixed day for the altcoin market
It was a mixed day for altcoin trading, with the majority of tokens in the top 200 recording losses as traders took profits and fled to the sidelines to wait for CPI-inspired volatility to subside.
Daily performance of the cryptocurrency market. Source: Coin360
Amp (AMP) rose 103% as the top gainer, followed by a 34.9% gain for Vanar Chain (VANRY) and a 21.8% gain for Injective (INJ). Celo (CELO), Monday's biggest gainer, was the day's biggest loser, down 9.1%, while OriginTrail (TRAC) lost 8.1%, and Moonbeam (GLMR) fell 6.8%.
The total market cap of cryptocurrencies is now $2.7 trillion, with Bitcoin dominance at 52%.
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