Bitcoin prices have rallied more than 70% this year, seeing one of the best quarters since the heat of the 2021 bull market.
Dreamstime
Bitcoin
and other cryptocurrencies edged lower Monday but remained near recent highs. The reaction in cryptocurrencies to the dramatic production cut by the OPEC+ group of oil-producing nations offers important clues as to the next move in digital assets.
The price of Bitcoin has fallen less than 1% over the past 24 hours, changing hands around $28,350. At levels above $28,000—shy of its recent peak near $29,500—the largest digital asset is trading around its highest level since last June, when the crypto crash accelerated. It has rallied more than 70% so far this year in a bullish turn.
Propelling cryptos higher has been an expectation that easing inflation and stresses on banks will push the Federal Reserve to be more accommodating on monetary policy, moderating interest-rate hikes and possibly even lowering rates this year. Decades-high inflation prompted the Fed to ratchet up rates over the past year, putting pronounced pressure on risk-sensitive assets like cryptos and stocks, which has seen Bitcoin become more linked with the
Dow Jones Industrial Average
and
S&P 500.
This correlation with equities and wider risk sentiment has dominated the price action in cryptos despite intense regulatory headwinds facing digital assets in the U.S. and overseas. The latest move shows no sign of this trend fading.
As news broke Sunday that the OPEC+ group of oil-producing nations would cut crude output by more than 1 million barrels a day in aggregate, Bitcoin quickly dropped from $28,150 to a trough near $27,600, the lowest level in five days. That mirrored a move in futures contracts tracking the tech-heavy
Nasdaq 100,
the index of stocks with which cryptos has proved to be most correlated, since digital assets and tech stocks are among the most risk-sensitive asset classes.
The pressure on cryptos as a result of the OPEC+ move comes amid soaring oil prices, which threaten to stoke inflationary pressures and could prompt more aggressive action from the Fed. That would be bad for Bitcoin.
It only highlights how dominant the macroeconomic picture and connection to the stock market is for cryptos, setting the stage for the end of the week, when the key U.S. jobs report for March will be released. Until then, barring major unforeseen regulatory shocks, investors can expect digital assets to keep swinging in step with stocks amid moves in wider risk sentiment.
Beyond Bitcoin,
Ether
—the second-largest crypto—slipped near 1%, holding above $1,800. Smaller cryptos or altcoins were more mixed, with
Cardano
up 3% though
Polygon
was below flat. Memecoins were further in the red, with
Dogecoin
down 5% and
Shiba Inu
shedding 3%.
Write to Jack Denton at [email protected]
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