Key Takeaways:
The cryptocurrency market experienced a steep decline on Monday after Bitcoin’s (BTC) price slipped 2.3% to $62,300 in the face of a potentially long-lasting higher interest rate environment in the US and changes made to collateral rules by the Depository Trust and Clearing Corporation (DTCC).
Bitcoin saw its value drop 1.5% in the last 24 hours to $62,613, with the leading cryptocurrency now trending closer to the lower end of $60,000 than the $70,000 range it had established since hitting an all-time high in March.
Meanwhile, Ethereum (ETH) – the world’s second-largest cryptocurrency by market capitalization – also saw its price fall 4.3% to $3,170. Furthermore, the global cryptocurrency market cap decreased by nearly 3% to approximately $2.31 trillion over the last 24 hours.
DTCC Will No Longer Allocate Collateral for ETFs With Exposure to Bitcoin and Crypto Assets
A major catalyst for the crypto price decline was leading American post-trade financial services company DTCC announcing that it will no longer be allocating collateral to exchange-traded funds (ETFs) or any other investment funds with exposure to Bitcoin and other crypto assets.
The move, which will go into effect starting April 30, is set to dampen the appeal of cryptocurrencies among traditional investors, who already view the digital assets as highly speculative.
Bitcoin had already been suffering from losses over the past week following fears of higher-for-longer US interest rates. The broader crypto market usually benefits from a low-rate, higher liquidity environment
The latest personal consumption expenditure (PCE) data, which is the Federal Reserve’s go-to inflation gauge, coming in hotter than expected asserted more downward pressure on the cryptocurrency market. Persistent inflation has been the US central bank’s biggest excuse against lowering borrowing interest rates on the dollar. Moreover, higher inflation readings over the past three months have put the Fed in a zone of low confidence to slash rates.
The financial markets will be closely watching the Federal Open Market Committee (FOMC) meeting, which is set to take place on Wednesday, to get more cues on what direction the central bank will be taking. As it stands, the Federal Reserve is widely expected to keep dollar interest rates unchanged.
Experts anticipate the Fed to begin cutting rates by September or in the last quarter of the year.
Tech Stocks on the Rise While Bitcoin ETF Inflows Decrease
Generally, the crypto market moves in tandem with US tech stocks. However, that correlation has somewhat changed over recent months, with crypto prices seeing limited upside from gains made in the tech market.
The digital currency market took little support from gains made across the tech industry. US tech titans Microsoft and Alphabet – parent of Google – reported stronger-than-expected quarterly earnings.
Meanwhile, there has been a slowdown in inflows across the spot Bitcoin exchange-traded funds (ETFs). However, a recent research report from analysts at Bernstein Research says the slump can be viewed more as a short-term pause than a harbinger of a worrying trend.
Researchers at Bernstein highlighted that Bitcoin price remains range-bound following the highly-anticipated halving event, with no clear momentum in either direction. The brokerage firm forecasts BTC to hit an ATH of $150,000 by 2025, bolstered by an unprecedented demand for Bitcoin ETFs.
The report also noted that the Bitcoin mining sector remains healthy post-halving, with industry leaders consolidating market shares and transaction fees on the blockchain stabilizing at a healthy 10% of miners’ revenues.
At the time of writing, Bitcoin (BTC) is trading at $63,421 – up 1.4% in the last 24 hours.
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