Bitcoin's 7% Drop in Five Days Fuels Investors' Anxiety Amid Global Economic Uncertainty
Summary:
Bitcoin's (BTC) value dropped 7% in five days, reaching a low of $61,795 on April 29. The dip in cryptocurrency interest is tied to events including the arrest of the founders of Samourai Wallet. Other factors include the risk of a U.S. recession, reduced inflows into Bitcoin ETFs and fears around BTC miners' profitability. Analysts highlight Bitcoin's failure to benefit from Middle East tensions, prompting investor indifference. Meanwhile, gold trades just 2.3% below its record price, raising questions about Bitcoin's role as a hedge. Market uncertainty prevails due to fears of global recession and high interest rates maintained by the U.S. Federal Reserve.
Over the last five days, Bitcoin's (BTC) value has experienced a 7% drop, bottoming out at $61,795 on April 29. Notwithstanding a minor bounce back to $62,900, investor confidence is waning, considering it's been over six weeks since Bitcoin hit its record high of $73,757. The diminishing appeal towards cryptocurrencies can be traced back to several incidents including the apprehension of the founders of Samourai Wallet.
Ambassadors of this wallet, known for its in-built coin mixing feature, were indicted with financial misconduct, including operating a non-licensed money-transmitting venture, by the U.S. Justice Department (DOJ), and other agencies on April 24. As can be seen in court documents, the organization accrued over $4.5 million in fees by abetting unlawful transactions.
Factors that contributed to Bitcoin's depreciating value on April 29 include a looming American recession, subpar investments in Bitcoin-based exchange-traded funds (ETFs), and the impact on BTC miners' profitability post the halving event. Although initially offset by a surge in blockchain space registrations, this trend has significantly decreased.
Market analysts speculate that Bitcoin's failure to leverage the mounting Middle East tensions has contributed to the lack of investor interest. On the other hand, gold is trading just 2.3% below its April 22 record closing price of $2,392, challenging Bitcoin's role as a protective asset.
Trader and influencer, "The Flow Horse", accurately captured market sentiment in an X social network post, highlighting gold prices' rise in response to Middle East conflicts, while Bitcoin's prices dipped amidst risk-investment escalations. Contrary to numerous analysts' claims, Bitcoin's value cannot be solely determined by its owners or core features.
Investor anxieties are towering over a global financial decline, with the U.S. Federal Reserve (Fed) expected to keep interest rates above 5% for a longer duration than predicted. Ex-Kansas City Fed president, Esther George, acknowledged that rate cuts would necessitate strong affirmation of a slow economy, as per Yahoo Finance. She noted that any Fed action could be delayed until 2025 due to the upcoming presidential election.
Despite the sluggish economy, companies continue to announce record-breaking profits for Q1. As per an April 26 report by FactSet, 77% of the S&P 500 companies have declared positive earnings surprises, boasting a 3.5% blended year-on-year growth. Hence, the reduced traction towards Bitcoin can be partly connected to the optimistic expectations for Amazon earnings on April 30, and Apple on May 2.
Bitcoin supporters presume that either the global economies will hit a recession or inflation will intensify during H2 2024 if the central banks intercede. However, even if this theory is validated, S&P 500 companies could serve as a protection, considering their earnings generation capacity and the $6.9 trillion in assets held by non-banking companies. Hence, stocks also battle for a part of reserve assets, even if it implies trading at values exponentially higher than their historical averages.
On May 1, for the first time in over two decades, the U.S. Treasury Department expects to recommence its debt buyback program, as per Yahoo Finance. The scheme aims to bolster liquidity, which gained significance after Japan, a significant holder of U.S. Treasuries, was obliged to expedite its foreign exchange rate on April 29. Consequently, investor skepticism looms over Bitcoin’s price stability given the deteriorating macroeconomic circumstances.
Please remember that this article does not offer investment advice or suggestions. All financial ventures carry risks, and individuals should carry out comprehensive research before arriving at any decisions.
Published At
4/29/2024 10:18:30 PM
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