Unexpectedly muted inflation figures led to a notable uptick in traditional stock and bond markets, but the cryptocurrency sector experienced a significant downturn, potentially influenced by diminishing excitement surrounding the imminent approval of a spot bitcoin ETF.
Despite favorable inflation data for October, the crypto markets endured one of their most substantial setbacks on Tuesday. Bitcoin (BTC) briefly plummeted to as low as $34,970 in the afternoon, down from nearly $36,600 earlier in the day after the Consumer Price Index (CPI) for October remained flat, contrary to expectations of a slight increase. At the time of reporting, bitcoin was trading at $35,300, marking a 3.7% decline over the past 24 hours.
Ether (ETH) also experienced a nearly 6% decline during the same period, relinquishing the $2,000 level it had regained just last week for the first time since July, following BlackRock’s filing for a spot ETH exchange-traded fund (ETF).
Major altcoins, including dogecoin (DOGE), Polygon’s (MATIC), and Tron’s TRON native tokens, faced declines ranging from 6% to 7% throughout the day. The CoinDesk Market Index (CMI), encompassing nearly 200 cryptocurrencies, reflected a 4.5% decline, underscoring widespread losses in the market.
While the crypto market encountered challenges, traditional markets embraced the notion that the Federal Reserve might conclude rate hikes and could potentially implement rate cuts in the first half of 2024. Towards the end of Tuesday’s session, the Nasdaq surged by 2.3%, advancing more than 10% in November, and the S&P 500 rose by 1.8%. Bond markets witnessed even more significant movements, with the 10-year Treasury yield plummeting by 20 basis points to 4.44%. Just three weeks prior, the yield had exceeded 5% for the first time in over 16 years. The DXY Index saw a substantial 1.55% decline.
Despite the challenging day for crypto, Grayscale, an investment management firm, suggested in a Tuesday report that slower inflation and reduced bond yields could potentially support crypto prices.
The report stated, “We believe the recovery in crypto valuations can continue if real interest rates peak and we continue to see progress toward spot ETF approvals in the US market.”
While ETF speculation remains at the forefront, Noelle Acheson, author of the Crypto Is Macro Now newsletter, expressed in an email to CoinDesk that the store of value narrative persists and will provide the asset with a resilient and increasing floor. Acheson doubts that the recent sell-off indicates the end of the current rally, attributing the decline more to profit-taking by sellers anticipating a potential SEC spot ETF delay.
The U.S. Securities and Exchange Commission’s (SEC) impending decision on Hashdex’s and Franklin Templeton’s spot bitcoin ETF filings, expected this Friday, has generated enthusiasm. However, many anticipate further delays this week, which could result in a temporary slowdown in crypto market momentum, according to K33 Research analysts cited in a Tuesday market report.