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As investors await the Federal Reserve's policy decision next Wednesday, both the stock and crypto markets came under pressure on Friday, with the major stock indices pulling back and the Nasdaq leading the decline, dropping nearly 1%.
Bitcoin retreated from its all-time high, briefly falling to around $66,000 during the early hours of Friday in the Eastern United States, rebounding to around $68,000 by the close of the U.S. stock market, with a 4% decline over 24 hours.
The decline in Bitcoin prices triggered a sell-off across the entire market, with the global cryptocurrency market capitalization falling by 4.1% to $2.59 trillion. The second-largest cryptocurrency Ethereum hit a weekly low, dropping over 4% to $3,670, while BNB and XRP fluctuated downward. Meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB) fell by nearly 10%.
The native token SOL of the Solana network bucked the trend, rising by 5.5% during the same period.
Volatility in global risk sentiment affects the crypto market
Although investors generally expect Federal Reserve officials to keep interest rates unchanged at next week's policy meeting, they are hoping for further clarity on when the Fed might begin cutting rates.
Meanwhile, U.S. consumers appear less optimistic, with the University of Michigan's monthly consumer sentiment index released on Friday coming in below economists' expectations.
Tim Courtney, Chief Investment Officer at Exencial Wealth Advisors, said, "Market sensitivity to interest rates is returning."
Shannon Saccocia, Chief Investment Officer at NB Private Wealth, said, "Next week's Fed meeting may be more important or impactful than we imagine."
Tony Sycamore, market analyst at IG Australia Pty, wrote in a report that Bitcoin "weakened due to the rise in U.S. bond yields and the dollar after producer price inflation data was released."
Funding rates reach highest level since 2021
In this week's On-chain Insight newsletter, IntoTheBlock stated that the amount paid by Bitcoin perpetual contract buyers to shorts reached its highest level since October 2021. The exceptionally high funding rates indicate a significant bias towards bullish sentiment in the market.
Analysts pointed out that BTC funding rates on "Binance and Bybit reached levels of 0.06% and 0.09% yesterday, which means that the annualized cost of going long on Bitcoin is 93% and 168% respectively."
The decline is accompanied by signs of increasing caution in the derivatives market, with CryptoQuant data showing a significant drop in funding rates or costs for Bitcoin perpetual futures positions, which are popular among speculators due to their lack of fixed expiration dates.
Dessislava Aubert, an analyst at Kaiko, said, "We've seen a wave of long liquidations, which exacerbated the sell-off. From the incremental BTC trading volume over the past 24 hours, selling pressure on Binance and Bybit began to accumulate at the end of the Asian trading session and then spread to other markets."
Kris Marszalek, CEO of Crypto.com, said on CNBC's "Squawk Box" on Friday that selling pressure may come from the options market, stating, "I think it's a healthy move, we are flushing out some of the leverage in the system."
Meanwhile, some traders warn that further losses may occur in the coming weeks before the price ultimately rebounds.
Alex Kuptsikevich, Senior Market Analyst at FxPro, said in a report, "New all-time highs trigger selling. Some participants are taking profits, which raises the question: are there enough buyers at current levels, or are most people willing to wait for a deeper correction?" Kuptsikevich's analysis suggests that the $60,000-$60,500 and $65,000-$65,500 ranges are important support levels to watch, based on Fibonacci retracement levels (a technical tool predicting potential price support and resistance). |
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Post time 25-3-2024 07:37:01