Bitcoin prices have soared this year amid expectations of easier monetary policy.
Dreamstime
Bitcoin
and other cryptocurrencies fell back Thursday with the momentum behind a recent rally seeming to fade and range-bound trading taking hold. But Friday holds a key macroeconomic catalyst—and the reaction of cryptos should be closely watched.
The price of Bitcoin has fallen 2% over the past 24 hours, slipping below and hovering around the key $28,000 level. The largest digital asset remains around the highest levels since last June, when the crypto crash accelerated, but has pared gains and appeared to lose steam since a recent spike above $29,000.
“Bitcoin’s recent pullback has confirmed that the trading range of the past two weeks remains in place,” said Alex Kuptsikevich, an analyst at broker FxPro. “The first cryptocurrency does not see any significant obstacles on the way down to levels near $27,000. The deepening drawdown could be influenced by negative sentiment in traditional financial markets.”
Digital assets, despite an increasingly clouded and complex regulatory backdrop, remain highly sensitive to macro forces and correlated with stocks, moving in step with the
Dow Jones Industrial Average
and
S&P 500.
Bitcoin’s remarkable rally so far this year—with gains of some 70%—have come amid expectations that the Federal Reserve will shift on monetary policy to a slower pace of interest-rate hikes and possibly even rate cuts soon.
A dramatic rise in interest rates last year, a campaign by the Fed to counter decades-high inflation with tighter financial conditions, was a driving force in the selloff across stocks and cryptos. But recent signs that inflation is cooling and that rate hikes are having painful effects—including introducing major stresses on banks—have seen traders temper their expectations of an aggressive central bank.
With Bitcoin trading trends so wrapped up in Fed policy, the release Friday of the U.S. jobs report for March—a key indicator for the Fed as it monitors inflationary pressures and the health of the economy—will be critical. And Bitcoin’s reaction is likely to be a leading indicator of how equities will react, since the stock market is closed for Good Friday while digital assets will continue to trade 24/7.
Beyond Bitcoin,
Ether
—the second-largest crypto—shed 1.5% to fall below $1,900. Smaller cryptos or altcoins were weaker, with both
Cardano
and
Polygon
declining 3%. Memecoins fell further after a recent, Elon Musk-fuelled spike, with
Dogecoin
down 6% though
Shiba Inu
shed just 3%.
Write to Jack Denton at [email protected]
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