Wednesday, February 1, 2023
HomeMarketBitcoin Pares Gains. Why the Coming Days Could Bring More Volatility.

Bitcoin Pares Gains. Why the Coming Days Could Bring More Volatility.

Bitcoin is likely to swing in step with stocks as key U.S. economic data are released this week.

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Dreamstime

Bitcoin
and other cryptocurrencies took a breather Wednesday, paring gains from a rally that has lifted digital assets to the highest levels in months. But the next week holds key macro catalysts that could see cryptos make another big move.

The price of Bitcoin has shed less than 1% over the past 24 hours to $22,700. The largest digital asset has slipped back from the peak of its recent rally to near $23,500, having charged more than 30% higher in two weeks to levels not seen since before the collapse of crypto exchange FTX rocked the market in November.

“The market is recognizing that there probably is not that much fallout left in the wake of the FTX collapse. The worst seems to be over. That collapse was such a surprise that it stirred a wave of panic selling and, in turn, sent crypto prices far lower than what they otherwise should have been valued at,” said Bob Ras, the co-founder of blockchain network Sologenic. “We could go lower from here, I should caution, but the momentum is certainly in the other direction.”

Now major macro catalysts lie ahead. Cryptos and stocks have become more correlated across the past year, with high inflation, rising interest rates, and recession risks putting pressure on all risk-sensitive assets. 

Bitcoin, like the
Dow Jones Industrial Average
and
S&P 500,
is poised to react to U.S. fourth-quarter gross domestic product (GDP) figures due Thursday as the economic growth picture remains salient. The personal consumption expenditures (PCE) index—the Federal Reserve’s preferred measure of inflation—will be in focus on Friday as investors gear up for the next monetary policy decision from the central bank on Feb. 1.

Beyond Bitcoin,
Ether
—the second-largest crypto—dropped 4% to $1,550. Smaller cryptos or altcoins were similarly downbeat, with
Cardano
and
Polygon
each losing more than 5%. Memecoins were in similar shape, with
Dogecoin
and
Shiba Inu
both down near 6%.

Write to Jack Denton at jack.denton@barrons.com

Credit: marketwatch.com

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