Bitcoin prices fell to a two-month low today. (Photo illustration by Chesnot/Getty Images)
Bitcoin prices have taken a tumble lately, declining to their lowest value in over two months today.
The world’s most value digital currency by total market capitalization dropped to $56,671.84 earlier, CoinMarketCap data shows.
At this point, the cryptocurrency’s price was trading at its lowest since approximately February 26, additional CoinMarketCap figures reveal.
After falling to this level, the digital asset bounced back somewhat, rising to $59,368.50 this afternoon.
However, at the time of this writing, bitcoin prices had surrendered most of these gains, fluctuating very close to $57,000.
When asked to explain the latest losses, analysts pointed to a handful of variables.
Lackluster Market Sentiment
Earlier today, a CoinDesk article spoke to generalized “risk-off sentiment” in the global asset markets, claiming that this mindset had set in as a result of expectations that Federal Reserve officials were unlikely to cut benchmark rates following their latest policy meeting.
The central bank announced at 2 p.m. that the members of the Federal Open Market Committee had voted against reducing benchmark rates, which are currently at their highest level in over 20 years.
Tim Enneking, managing partner of Psalion, commented on this situation. When asked what drove bitcoin’s latest declines, he provided the following reply via email.
“One reason is clearly correlation with fiat assets, which are clearly in a risk-off mood due to the US Federal Reserve’s comments regarding not cutting interest rates until much later this year, if at all.”
Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management, also weighed in via email.
“I believe the macro market broadly pulling back is a major reason why Bitcoin is down as well,” he stated.
“I agree that market participants have a risk-off sentiment ahead of the Fed’s interest rate meeting,” Sifling said earlier today.
“However, today’s meeting will likely be a non-event, especially since they continue to push out the timeline to lower interest rates until later this year.”
Impact Of The Halving
Another variable that was cited as potentially contributing to bitcoin’s recent downside was how the digital currency tends to behave after its network experiences a so-called halving, where the mining incentive is cut by 50%.
Enneking spoke to this. He previously emphasized cryptocurrency’s correlation to the broader global asset markets, and how these were affected recently by risk-off sentiment, served as one reason why bitcoin fell lately.
However, added that “Another, though, is simply the typical BTC move after each of the prior three halvings: the following two quarters are quite soft, then the real bull market kicks in the year after the halving.”
“While spot BTC ETFs have distorted that pattern a bit this time around, the underlying thesis apparently still holds,” Enneking elaborated.
However, Sifling seemed skeptical of this generalization.
“With a super small sample size of prior halving, it’s really hard to tell, he stated.
“I came across this data on a CNBC article recently,” said Sifling, which can be found here. The piece cites data from Coin Metrics.
“It looks like the 2016 halving might have fit his described pattern, but the May 2020 halving actually had a 13% return after the first month,” he noted.
“I do agree with that most of Bitcoin’s gains seem to come at least 3 months after the halving event.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.
