- The bull momentum that pushed the price of Bitcoin above $31,500 on July 6 disappeared with the emergence of concerns about potential interest rate hikes.
- Although the Fed halted interest rate hikes on June 14, Fed Chairman Jerome Powell appears determined to restart interest rate hikes to reduce inflation.
- Despite the recent institutional interest in Bitcoin, actions by US regulators are still met with uncertainty.
Why did the price of Bitcoin briefly drop below $30,000 today; what are the factors triggering the price decline in Bitcoin?
What Factors Influenced the Price of Bitcoin Today?
The bull momentum that pushed the price of Bitcoin above $31,500 on July 6 disappeared with the emergence of concerns about potential interest rate hikes. The decline in the price of Bitcoin briefly dropped BTC below $30,000, and on top of renewed concerns, traders are worried that Bitcoin miners sending BTC to exchanges could be a sign of an upcoming selling wave.
Although the Fed halted interest rate hikes on June 14, Fed Chairman Jerome Powell appears determined to restart interest rate hikes to reduce inflation. After Powell’s speech at the Federal Open Market Committee (FOMC) on June 14, the market began to believe with confidence that the Fed would start raising interest rates again.
CME’s FedWatch tool shows that the market believes these hikes will occur at the next FOMC meeting on July 26. As of July 6, the probability of a 25 basis point interest rate hike is 92.4%.
So far, crypto prices have been highly correlated with the Dow and S&P 500, and most major banks still expect the US to experience a sharp slowdown at some point in 2023.
According to an analysis by a US bank that includes over 1,000 data points, investor sensitivity about the current state of the economy continues to be low. According to the analysis by the US bank;
“Ongoing inflation, high interest rates, and uncertainty about the pace of earnings growth in 2023 prevent stock prices from rising. While the pace of inflation has slowed, the Fed is taking a less aggressive stance and earnings projections have stabilized.”
Regulatory Pressures on Crypto Exchanges Led by the US Continue to Impact the Markets
Despite recent institutional interest in Bitcoin, actions by US regulators are still met with uncertainty. On June 5 and 6, the US Securities and Exchange Commission (SEC) filed lawsuits against Binance and Coinbase, two of the largest centralized exchanges for cryptocurrencies. This action caused Binance US’s market share to drop from 22% to below 1%.
Although the SEC previously stated that Bitcoin is not a security, some market analysts are evaluating whether the current actions are a relaunch of Operation Chokepoint 2.0, which aims to restrict access to all digital currencies.
There may still be a pending lawsuit against Coinbase, but ETFs such as BlackRock and Valkyrie list Coinbase as a custodian. While some commentators are excited about the possibility of Bitcoin ETFs, not all analysts agree that this structure is healthy for the price of Bitcoin.
Can the Price of Bitcoin Reverse?
The short-term uncertainty in the crypto market does not seem to have changed the long-term perspectives of institutional investors. Despite a hostile regulatory environment in the US, major institutions are creating momentum for Bitcoin financial instruments, which could trigger a bull run.
The price of Bitcoin continues to be directly influenced by macroeconomic events, and regulatory actions and interest rate hikes are likely to continue to have some impact on the price of BTC.
In the long run, market participants believe that the price of Bitcoin will recover, especially considering the increasing adoption of BTC by more financial institutions.
