Bitcoin crossed the $40,000 mark! Is it good news?
The most powerful cryptocurrency didn’t feel that powerful in the past 14 days, as it was down 11%, slowly healing from the wounds. According to the market, Bitcoin dived to $38,779 on Monday, but now it’s floating at $41,488.40.
Bitcoin’s bounce has helped other cryptocurrencies in the market, and they are up by 3.2% in the last 24 hours. Ethereum (ETH), thought to be second to Bitcoin, was trading at $2,898 before the rise, and now it’s at $3,107, handling pretty well.
Experts are suggesting that Bitcoin might fall again and won’t be able to hold the $40,000 position for long enough. Reasons? The U.S. Dollar Currency Index (DXY) hit its annual high of 101.02 this week. There has always been an inverse equation between Bitcoin and the dollar for the last ten years, and this fact is even known by the kids trading on their mobile devices.
Bitcoin’s price has always tended to go in the opposite direction of the DXY momentum. The meaning? The U.S. Dollar starts gaining momentum, and Bitcoin gets nervous, starts underperforming, and vice versa. The above reason is not the only attribute responsible for the recent collapse of Bitcoin.
The crypto market is so diverse that downfall and rise can’t be blamed on only one specific point or a reason. It’s naturally the amalgam of many different circumstances. Nevertheless, many senior research analysts of cryptocurrency support the statement.
Many experts also speculate that tax day in the U.S. was partially reasonable for the market slide. Many Americans had to withdraw from cryptocurrency to pay their taxes before the April 18 deadline.
It was visible to the naked eyes that BTC and ETH had a rebound as soon as the stock market was shut on Monday (4 p.m. EST). There isn’t enough proof that it was discretionary traders or just the algorithm, but tax selling seems a fundamental reason for the instability.
At the start of April, Bitcoin was going down with the stock market. It might have happened because the U.S. Federal Reserve released minutes on April 6 about its March 15 and 16 policy meeting. It had plans for the central bank’s reduction in the balance sheet and the rise of interest rates. After this release, tech stocks and risk assets like cryptocurrency plunged like butter on a hot pan.
Many crypto analysis companies released a newsletter on April 8 stating that Crypto’s relation with the stock market is back in the game. Investors observed that the market reacted negatively to news of a possible 50-basis point interest rate expansion and quantitative tightening in the forthcoming Federal Reserve meeting. These delusions of Bitcoin as the safest investment and hedge against inflation, but even the most common research shows that the crypto market moves along the S&P 500.
The correlation between them is not surprising because cryptocurrencies have been institutionalized in recent years. The largest buyers in the market want only one thing “interest rates and quantitative tightening [QT],” now, one might be able to see the similarities between stocks and crypto. So you can say that the recent hawkish news and the possibility of QT happening in May is taking a good toll on crypto prices.