Bitcoin fell below the $25,000 mark for the first time in a while in mid-June of this year after the Federal Reserve threw yet another monkey wrench into America’s economic plans.
Major June Dip for Bitcoin
During that time, the Federal Reserve announced that while it was not going to be hiking rates again in the immediate future, citizens of the U.S. could potentially expect to experience the effects of at least two more rate hikes before the end of the year. In other words, two more hikes would occur within the next six months.
Bitcoin didn’t take too kindly to the news and reacted somewhat violently, dropping into the $24K range after it had been trading for about $25,800 for the past 48 hours or so. That’s a drop of about $1,000 in just a few days. It just goes to show traders that bitcoin is still highly sensitive to present macroeconomic conditions being faced by the U.S., and while the crypto winter of last year may be marginally over, things aren’t quite as strong as they could (or should) be.
Michael Safai – managing partner at Dexterity Capital – commented on the bitcoin dip to occur after the Federal Reserve announcement. He said:
This has little to do with the FOMC and more to do with thinner liquidity and weak sentiment. Given how thin trading volumes are [now], a sizable (but not massive) sell order is enough to set off liquidations. Traders are more inclined to keep their money off the table [amid] this regulatory backlash, especially when it comes to altcoins, so there isn’t going to be much new capital flowing in to buoy prices so readily.
To be fair, a lot has been going on in the last six weeks that bitcoin should have reacted more to, yet for some reason, it didn’t. For example, major lawsuits stemming from the Securities and Exchange Commission (SEC) against Binance and Coinbase – the two biggest digital currency exchanges in the world – should have ultimately caused bitcoin to tank like no other event has.
Is Regulation Coming or Not?
However, bitcoin remained relatively resilient during all that, losing only a few hundred dollars here and there and experiencing marginal bumps after the news made headlines. Safai added:
Further confusion about the legality of popular altcoins is keeping capital on the sidelines, and it’ll take a long run of good news or no news to get traders feeling excited about a recovery. Bitcoin prices will stay relatively rangebound between $25,000 and $27,000 until the next set of regulatory headlines tell us whether we’re heading towards resolution or even more obfuscation.
The issue of regulatory clarity in the crypto space has long been a huge one, and calls have only increased tenfold since the fall of FTX last November.
