Cryptocurrencies were encountering headwinds Thursday due to reemerged apprehensions about the American economy. Bitcoin was trading at around 4% less than its prior at $27,901.60, according to Coin Metrics. The dip began after the minutes of the Federal Reserve's July policy meeting emerged Wednesday. Earlier Thursday, it sank to $27,858.94, its lowest ebb since June 20.The minutes indicated that Fed officials noticed "upside risks" to inflation that could potentially lead to additional rate hikes. At that meeting, the Fed raised its benchmark interest rate to its highest since the last 22 years. Markets surmised the central bank wouldn't take any more actions regarding interest rates this year, and in response, the stock market plunged for a second successive day Wednesday and the 10-year U.S. Treasury yield achieved its highest close since 2008.
Coin Metrics reported that Bitcoin's correlation with stocks has reached its lowest level in two years. Market analysts speculate that the Fed's rate-hiking strategy to tame inflation, which spurred the historical high in 2022, is causing investors to move away from riskier assets, like Bitcoin. According to Sylvia Jablonski, Chief Investment Officer at Defiance ETFs, portfolio managers could be expecting a recession, hence why they are avoiding high volatility stocks and digital coins.
Kaiko data revealed that Bitcoin and Ethereum's ninety-day volatility had decreased to multi-year lows in the mid-thirties percentages. John Todaro, an analyst at Needham, also noted that the rally back to $30, 000 with light volume in June did not provide Bitcoin with much momentum. He further added that the much-awaited release of a spot crypto ETF has lost some of its appeal due to the SEC's rulings.
Most of the prominent digital tokens such as BNB Coin, XRP, Solana, and Polygon plummeted on Thursday to fall below three percent. Ethereum faced an unprecedented four percent drop.
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