After a two-week lull, crypto markets finally saw a bit of a change as investors were unsettled by UK inflation and Janet Yellen’s latest warning of a US debt ceiling freeze sent prices tumbling on Wednesday.
Bitcoin recently traded around $26,440, down about 3% over the past 24 hours and near its lowest level since May 12, when the largest cryptocurrency by market cap fell below $26,000. During this time, BTC has experienced low trading volume and volatility as markets grapple with the prospect of a US government defaulting on its debts and ongoing cryptocurrency regulatory and macro uncertainties. As of Wednesday, bitcoin was trading in the $26,500 to $27,500 range.
In an email to CoinDesk, Ruslan Lienkha, head of markets at fintech platform YouHodler, wrote that “elevated tensions in financial markets” have hurt stocks and digital assets.
“US stock indices are under selling pressure amid rising concerns over a possible US default: with the authorities only having about 10 days left to reach an agreement, we have yet to see any progress in these negotiations,” Lienkha wrote. “All of this uncertainty is forcing financial institutions to restructure their assets and prepare for a potential default, putting additional pressure on participants in financial markets.”
Ether recently changed hands around $1,808, down about 2.6% from the same time Tuesday. Most major cryptos spent Wednesday significantly lower, with LTC and SOL, the token of the Solana smart contracts platform, falling more than 5.2% and 3.6%, respectively. The CoinDesk Market Index, a measure of how crypto markets are performing, fell 2.8%. CoinDesk’s bitcoin trend indicator remained in the downtrend zone where it recently fell – a reflection of falling investor optimism. A number of analysts believe Bitcoin will remain stuck until a new catalyst emerges.
Major stock indexes struggled similarly on Wednesday, restoring the correlation between stock and crypto prices, at least temporarily, with the tech-heavy Nasdaq, the S&P 500 and the Dow Jones Industrial Average (DJIA) each falling more than a percentage point. The two asset classes have always taken different paths in recent months, but Yellen’s third warning this month that the US “could run out of money” without a debt limit agreement appeared to wipe out all assets.
Earlier Wednesday, cryptos tumbled after the latest UK consumer price index (CPI) rose 6.8% in April, above the 6.2% expected and the highest level since 1992. The disappointing CPI suggested that the UK Central bank had to continue its recent diet with rate hikes that have generally discouraged crypto markets.
In an interview with CoinDesk TV on Wednesday, Glen Goodman, author of “The Crypto Trader,” noted that Bitcoin has maintained a stronger connection to the price of gold, a traditional safe haven asset, of late. However, he added that BTC still lacks a consistent motivation to consider investors’ buying and selling decisions.
“We still haven’t found a reason why everyone needs to have a goal, but rather a set of reasons,” Goodman said. “The only problem is that people can’t agree on a main narrative. We are waiting for events, for some kind of catastrophe to befall the world economy, such as the collapse of the dollar. And then, of course, everyone would come together around a narrative.”