By Immanual John Milton
Bitcoin slumps, erasing all of the prior session’s gains and ending a four-day winning streak as crypto investors brace for Wednesday’s inflation data.
The largest cryptocurrency by market value was down 4.2% to $23,067 at 2:57 p.m. in New York, the biggest one-day drop since June 26. Other cryptocurrencies didn’t fare much better, as Ether — Ethereum’s native token — sank below $1,700 on losses of around 6%, Cardano and Solana both took similar losses.
The recent Bitcoin rally is stalling ahead of the upcoming consumer-price index report, which is forecast to show a slowdown in July, according to Ed Moya, a senior market analyst at Oanda.
“Inflation is what killed Bitcoin late last year and if pricing pressures are showing significant signs of easing, Bitcoin might be able to burst above its recent trading range,” Moya said.
Matt Maley, chief market strategist at Miller Tabak & Co., says of inflation is higher than expected, then cryptocurrencies should drop, but if it’s lower, then there could be more liquidity from a potential Federal Reserve pivot, he said.
“At least a part of what’s happening with Bitcoin and the other cryptocurrencies, in the last two years, has been determined by the level of liquidity in the system,” Maley said.
“When the Fed was really pumping after the crisis, that helped the cryptocurrencies rally in an outsized way, more than they should have. Then of course, when they started to started hinting that they were going to take away some of that, it started to fall,” Maley added.
Despite Tuesday’s drop, Bitcoin has enjoyed a recent uptick after months of being beaten down, as it finally broke through several closely watched price levels. The bellwether crypto asset has been trading around $23,000 after posting its best month since October in July.
Still, risk-off sentiment and investor caution abound in the market. Michael Novogratz, the billionaire who founded crypto financial services firm Galaxy Digital Holdings Ltd., said that he is doubtful of Bitcoin will break through the $30,000 level anytime soon in a Bloomberg TV interview on Monday.
“I quite frankly would be happy if we’re in a $20,000, $22,000 or $30,000 range for a while,” Novogratz said. “We’re not seeing huge institutional flows, to be fair, but we’re not seeing anyone back away.”
Recent turmoil is not likely to ease investor worries as another exchange, Hodlnaut, halted withdrawals and the US Treasury Department slapped the Tornado Cash protocol with sanctions. Despite the recent gains, buffeted investors are staring at a year-to-date loss of around 50%.
“The volatility is, and always has been, huge with any of these crypto investments,” Brian Nick, chief investment strategist at Nuveen, said in an interview.
