Despite a notable upswing in stock and bond markets following an unexpected slowdown in inflation, the cryptocurrency market faced a substantial setback, potentially linked to diminishing optimism about the imminent approval of a spot bitcoin exchange-traded fund (ETF).
On Tuesday, crypto markets endured one of their most challenging days in weeks, despite favorable inflation data for October. Bitcoin (BTC) briefly plummeted to as low as $34,970 in the afternoon, down from nearly $36,600 earlier in the day, following the release of a flat Consumer Price Index (CPI) for October, which had been anticipated to show a slight increase. As of the latest update, bitcoin was trading at $35,300, reflecting a 3.7% decrease over the past 24 hours.
Ether (ETH) also experienced a nearly 6% decline during the same period, losing the $2,000 level it had recently regained for the first time since July, propelled by BlackRock’s filing for a spot ETH exchange-traded fund (ETF).
Major altcoins like dogecoin (DOGE), Polygon’s (MATIC), and Tron’s TRON native tokens faced 6%-7% declines throughout the day. The broader cryptocurrency market, as measured by the CoinDesk Market Index (CMI), dropped by 4.5%, indicating widespread losses.
In contrast, traditional markets embraced the notion that the Federal Reserve might be concluding rate hikes and could potentially reduce rates in the first half of 2024. Late in Tuesday’s session, the Nasdaq rose by 2.3%, surpassing a 10% increase for November, and the S&P 500 was up by 1.8%.
The bond market experienced even more pronounced movements, with the 10-year Treasury yield dropping by 20 basis points to 4.44%. Just three weeks earlier, heightened anxiety had pushed the yield above 5% for the first time in over 16 years. The dollar also followed suit, with the DXY Index witnessing a significant 1.55% decrease.
Despite the challenging day for crypto, Grayscale, an investment management firm, suggested in a Tuesday report that slower inflation and lower bond yields could lend support to cryptocurrency prices. The report highlighted the potential for continued recovery in crypto valuations if real interest rates peak and progress toward spot ETF approvals in the U.S. market continues.
Noelle Acheson, the author of the Crypto Is Macro Now newsletter, expressed optimism, stating that the decline is more likely tied to profit-taking by sellers ahead of a possible Securities and Exchange Commission (SEC) spot ETF delay. The SEC’s decision on the approval, denial, or delay of Hashdex’s and Franklin Templeton’s spot bitcoin ETF filings is expected this Friday, with many anticipating further delays despite recent enthusiasm about potential approvals.