Bitcoin faced a decline to a one-week low in tumultuous trading, prompted by investors seizing profits following its recent record-breaking highs and reacting to unexpected U.S. inflation figures. The cryptocurrency dropped over 5% during the Asian session, hitting $66,629.96, before moderating losses to trade 3.5% lower.
This volatility followed Bitcoin’s ascent to a new pinnacle of $73,803.25, extending its streak of record highs for the fourth consecutive day. Analysts warn of Bitcoin’s historical trend of heightened volatility post-record highs, compounded by less dovish signals from the Federal Reserve.
Matt Simpson, senior market analyst at City Index, noted Bitcoin’s propensity for volatility after reaching record levels. He highlighted concerns over the Federal Reserve’s less accommodative stance than anticipated.
Recent U.S. economic data added to market jitters, showing a less-than-expected rebound in retail sales in February and higher-than-anticipated producer prices. These figures emerged following earlier data indicating persistent inflationary pressures.
Market sentiment shifted as futures markets adjusted, signaling reduced probabilities of Federal Reserve rate cuts in June. The probability of a rate cut that month decreased from roughly 74% a week ago to approximately 60%, according to the CME FedWatch tool.
A scenario of prolonged higher interest rates, particularly in the U.S., typically spells trouble for risk-sensitive assets like cryptocurrencies.
Nevertheless, Bitcoin maintains a nearly 60% gain for the year thus far, propelled by increased flows into U.S. spot exchange-traded crypto products and ongoing speculation surrounding global interest rates.
In a demonstration of confidence in Bitcoin’s bullish trend, software firm MicroStrategy announced plans for a second round of capital-raising through a convertible bond offering to purchase Bitcoin.
This move follows a similar initiative announced on March 5, reflecting the company’s desire to bolster its exposure to the burgeoning digital asset.
Joshua Chu, chief risk officer at Invess, noted the absence of regulations in the crypto market, allowing significant trades by influential entities to trigger rapid price fluctuations and heightened volatility.
Elsewhere, ether, the second-largest cryptocurrency, mirrored Bitcoin’s downturn, touching a one-week low and falling over 4% to $3,670.
