By Bitcoin and other cryptocurrencies have finally shown some movement after a period of stagnation. Traders are selling off digital assets as they anticipate higher interest rates for a longer duration than previously expected.
Over the past 24 hours, the price of Bitcoin has fallen by 2%, reaching $28,500. This recent volatility is quite characteristic of Bitcoin, the largest cryptocurrency, which has experienced minimal movement in the past few months. It has remained stagnant between the $29,000 and $30,000 range, displaying historically low levels of volatility.
Bitcoin investors have eagerly awaited a catalyst to break free from this monotonous phase. With the decline in price, the resilience and nerves of Bitcoin holders will be put to the test. According to Antoni Trenchev, co-founder and managing partner at crypto lender Nexo, this drop brings Bitcoin to the bottom of its trading range that has persisted for nearly two months.
Similar to the stock market’s recent decline with the Dow Jones Industrial Average and S&P 500 experiencing significant drops, Bitcoin’s movements are influenced by economic data and the latest meeting minutes from the Federal Reserve’s monetary policy committee.
Economic Data Reinforces Strong U.S. Economy
Data releases on various economic metrics this week have further emphasized the narrative of a robust economy in the United States. Forecasts for third-quarter gross domestic product growth have also been revised upward, underscoring the positive state of the nation’s economy. Moreover, minutes from the Federal Reserve’s policy decision in June, which were released on Wednesday, confirmed their ongoing dedication to reducing inflation through the implementation of higher interest rates.
Impact on Interest Rates and Investor Expectations
Given the strength of the economy, the Federal Reserve has little incentive to lower interest rates from their generational highs. Additionally, investors are increasingly anticipating more rate hikes in the near future. The continuous rise in rates since March 2022 has significantly influenced assets sensitive to risks, such as stocks and Bitcoin. Consequently, the latest news does not bode well for the cryptocurrency market.
Bitcoin’s Potential Decline
With this recent turn of events, what lies ahead for Bitcoin?
“The drop below $28,800 confirms the prevailing dominance of bearish sentiment. The next critical support levels are located at the round level of $28,000, followed by the $27,200 range, where the 200-day moving average and uptrend support from last November converge,” explained Alex Kuptsikevich, an analyst at broker FxPro.
Impact on Other Cryptocurrencies
Alongside Bitcoin, Ether—the second-largest cryptocurrency—has experienced a 2% drop, reaching $1,790. Altcoins, including Cardano and Polygon, have also slipped approximately 1%. Memecoins have demonstrated weaker performance, with Dogecoin experiencing a 3% decline and Shiba Inu shedding 8%.
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