Bitcoin failed to follow the upward trend of other assets in global markets as investors became more optimistic about the outlook for inflation in the United States. This has led to some concerns about the future of cryptocurrency.
On Thursday, the largest digital asset added to losses of 0.7% from the previous day as equities and bonds increased on hopes that the Federal Reserve’s monetary tightening would soon come to an end.
After a jump in June, Bitcoin has stopped this month due to a flurry of applications by major investment firms like BlackRock Inc. to launch US exchange-traded funds that invest in the spot market for the unit. Investors are now speculating on how much longer Bitcoin’s 83% recovery from last year will last.
According to Sycamore, there is an increasing likelihood that Bitcoin may drop towards $25,000 to $26,000, or about the area of its 200-day moving average.
Crypto researchers pointed to rumours that the US may be preparing to sell part of the cryptocurrency as a potential explanation for its lacklustre post-inflation performance.
On Wednesday, increases of more than 1% were seen in global shares, a bond gauge, gold, and oil after the US inflation rate dropped to a level more than two years below its low of 3%. Currency markets were shaken when the dollar index touched a 14-month low.
In stark contrast to the sentiment across other asset classes, the price of Bitcoin and a measure of the top 100 digital tokens both declined. Some forecasters believe that Bitcoin’s partial recovery from a crypto crash in 2022 may only be a matter of time.
According to a letter from cryptocurrency fund provider Grayscale Investments LLC, “we would expect lower US inflation and reduced odds of Fed rate hikes to support digital asset markets broadly over the medium term.” Grayscale claimed that as investor interest in riskier crypto coins grows, Bitcoin’s dominance of the $1.2 trillion digital asset market may decline.
Bitcoin was trading at $30,290 as of 1:19 p.m. in Singapore on Thursday, down from its record high of about $69,000 set in 2021, when it lost as much as 0.3%.
