Bitcoin and other cryptocurrencies experienced a slight increase in value on Tuesday. However, they continue to face pressure from rising bond yields, similar to the stock market. Investors are carefully considering the outlook for interest rates and Federal Reserve monetary policy.
The price of Bitcoin has only risen by less than 1% in the last 24 hours, reaching $26,250. This places the largest cryptocurrency near the lower end of its $26,000 range, which has been dominant for over a month due to exceptionally low volatility and trading activity. On September 19, Bitcoin was valued at around $27,200, before the Federal Reserve’s decision on interest rates and the release of its summary of economic projections caused the dollar and government bond yields to soar.
XTB analyst Hani Abuagla comments, “Cryptocurrency market sentiment remains weak due to declines in global stock markets, a strong dollar, and rising yields that put pressure on risk assets.”
Similar to the Dow Jones Industrial Average and S&P 500, Bitcoin faces challenges from a strong dollar and high bond yields. The attractiveness of the US dollar and the higher returns offered by risk-free US Treasuries discourage investors from entering riskier investments like Bitcoin. Recently, Treasury yields have reached their highest levels in over a decade as investors digest the latest messaging from the Federal Reserve indicating that borrowing costs are expected to remain higher than previously anticipated.
Macroeconomic Headwinds Continue to Impact Cryptos
Despite the hype and excitement surrounding cryptocurrencies, they have recently experienced a period of stagnation. The lack of major catalysts in the crypto market, coupled with macroeconomic headwinds, has led to record low trading volumes and reduced volatility. This trend has deterred investors who were previously attracted to the potential gains offered by cryptocurrencies.
One key factor contributing to the subdued performance of Bitcoin is the delay in the Securities and Exchange Commission’s decision regarding spot Bitcoin exchange-traded funds. This decision is likely to be months away. Additionally, the anticipated change in Bitcoin’s supply through the halving process is not scheduled to take place until next year. These factors give little reason to believe that Bitcoin will break out of its current slow period anytime soon.
Matteo Greco, an analyst at digital asset investment group Fineqia, highlighted the low trading volumes, both on centralized exchanges and on-chain, despite the conclusion of the summer season. Greco also mentioned that central bank policies, particularly those implemented by the Federal Reserve, have redirected capital towards safer investments such as government bonds.
In terms of other cryptocurrencies, Ether, the second-largest crypto, experienced a modest 1% rise and reached $1,590. Smaller tokens, known as altcoins, also saw some gains, with Cardano climbing less than 1% and Polygon experiencing a noteworthy 2% increase. However, memecoins like Dogecoin and Shiba Inu remained relatively stable.
It is evident that the current macroeconomic climate, coupled with the absence of major catalysts in the crypto market, has had a significant impact on the performance and trading volumes of cryptocurrencies. Investors are eagerly awaiting any positive developments that could reignite interest and potentially drive the market forward.