Bitcoin dipped to a one-week low in volatile trading on Friday as investors capitalized on its recent record high and as another positive U.S. inflation report reduced the likelihood of early interest rate cuts, dampening demand for riskier assets. During the Asian session, Bitcoin dropped over 5% to touch $66,629.96 before recovering some losses to trade 3.5% lower.
The fluctuations in the world’s largest cryptocurrency followed its surge to a peak of $73,803.25 the previous day, marking a new record for the fourth consecutive day. Matt Simpson, a senior market analyst at City Index, noted, “Bitcoin has a history of becoming volatile and unpredictable after reaching a record high. Additionally, the Federal Reserve’s stance appears less accommodative than traders had anticipated.”
Thursday’s data releases revealed that while U.S. retail sales rebounded less than anticipated in February, producer prices rose more than expected. This data, coupled with earlier consumer price data indicating persistent inflationary pressures, led to a revision in the market’s expectations for a Fed easing cycle, with futures now indicating a roughly 60% probability of a rate cut in June, down from approximately 74% a week ago.
A scenario of higher interest rates, particularly in the United States, typically unfavorably impacts risk-sensitive assets like cryptocurrency. Nevertheless, Bitcoin remains nearly 60% higher year-to-date, fueled by a crypto frenzy and traders’ anticipation of global interest rates remaining lower by the year’s end.
Software firm MicroStrategy announced plans to raise capital through a convertible bond offering to purchase Bitcoin for the second time in under 10 days, reflecting optimism about Bitcoin’s upward trend. This news, according to some experts, also contributed to Bitcoin’s volatile movements on Friday.
Ether, the second-largest cryptocurrency, similarly touched a one-week low, declining over 4% to $3,670. Joshua Chu, chief risk officer at Invess, emphasized that unlike traditional stock markets, the crypto market lacks regulations that restrict the influence of individuals or entities with concentrated holdings, allowing significant trades to trigger rapid price fluctuations and heightened volatility.
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