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Bitcoin dropped from the highs it had brought in from its Tuesday rally, where it achieved its peak since April 2022. Investors signified anxiety over the possibility that the U.S. Securities and Exchange Commission would not endorse an ETF as soon as expected by the prominent bitcoin optimists. The market also monitored the most recent Federal Reserve meeting notes, which showed the central bank alerting that rates could remain "[entrenched] at a restrictive attitude for some time", as well as the comments from Richmond Fed President Barkin proclaiming that interest rate increases still stand "[as an option] on the table".
Bitcoin prices reversed their gains from the start of the year on Wednesday due to a combination of investors considering the Federal Reserve's policy outlook and taking precautions ahead of the Securities and Exchange Commission's decision regarding a potential bitcoin exchange-traded fund. At the time of writing, the digital asset traded 4% lower at $42,685.85 according to Coin Metrics. Earlier in the day, it had fallen as much as 6%, erasing almost all of its gains on Tuesday when it had touched $45,913.30, its highest level in over two years. Meanwhile, ether retreated by 6% to trade at $2,221.27, while other digital coins suffered deeper losses. Solana was down 7%, XRP declined 6%, and litecoin and dogecoin slid by 10% and 9%, respectively. Uncertainty that the SEC won't approve an ETF this year reportedly led to a sell-off amongst short-term traders who were unwinding their long positions, particularly as leverage had grown rapidly. This was suggested by Noelle Acheson, economist and author of the “Crypto is Macro Now” newsletter.
Gautam Chhugani of Bernstein disregarded the fears in a note published Wednesday morning. He maintained that each price drop of the ETF is a market chance to buy bitcoin/bitcoin miners and the market is expected to rise considerably when the approval is finalized (probably at the conclusion of next week). Darius Tabatabai, co-founder of Vertex Protocol, a decentralized exchange, stated that the crypto market had become overheated, experiencing its seventh month with ascending bitcoin prices. He alerted that spot and funding rates were exceedingly high at the end of December, which is not a beneficial indication for stability and the sell-off today appears to be generally encouraging. According to CryptoQuant, bitcoin funding rates had reached their highest in October 2021 since the start of records in 2016.
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Richmond Federal Reserve President Thomas Barkin warned on Wednesday that while a soft landing is likely, interest rate hikes remain an option. Minutes from the Fed's latest meeting reinforced this sentiment, with policymakers noting that it would be appropriate for policy to remain at a restrictive stance for an unspecified amount of time, depending on inflation. The path to lower interest rates is therefore uncertain.
Zach Pandl, director of research at Grayscale Investments, observed that today's bitcoin price activity has taken on a macro trade quality, seeing weakness in stocks, bonds and gold, while the dollar has been in ascendance. January hasn't been especially kind to bitcoin, as it has finished the month positive only five out of the past 11 years, according to CoinGlass data. Before December ended with a 12% upsurge, bitcoin was consolidating for the previous three weeks and more than doubled in value in 2023, with a 157% increase.
CNBC reporters Jeff Cox and Michael Bloom also provided commentary on the matter. Those wishing to know what the biggest S&P 500 or Dow winners of 2024 are, or how to invest $50,000 in the new year, or if a potential bitcoin ETF approval could cause a "sell-the-news" event, or how Oprah's opinion on weight loss drugs foreshadows the ‘Ozempic trade’ of 2024, are encouraged to read the related articles.
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