Bitcoin (BTC) slipped below the $27,000 mark without experiencing the significant price surge seen in recent weeks following the latest banking debacle in the United States. The leading cryptocurrency by market capitalization was trading at approximately $26,950, marking a decline of over 3% in the past 24 hours. BTC had been hovering above $27,000 on Thursday morning before dipping below that level around 1 p.m. ET. Over the past week, BTC has been on a downward trend as investors search for a new catalyst to drive prices. On Wednesday, Bitcoin fell below $27,000 for the first time since March, briefly recovered, and then fell again.
Vineeth Bhuvanagiri, the managing director of Emurgo Fintech, the founding entity of the Cardano blockchain, expressed concern about low liquidity among investors. According to Bhuvanagiri, even seemingly minor selloffs have a disproportionate impact on the price. However, the recent outflow of deposits at PacWest Bancorp (PACW), which led to a 22% drop in the bank’s stock price, did not generate significant demand for cryptocurrencies this time around, as stated by Edward Moya, senior market analyst for foreign exchange Oanda, in a Thursday note. Moya added that fears of banking contagion remain low, citing banks like Western Alliance that have seen rising deposits. Bhuvanagiri suggested that a significant macro shock, such as a default triggered by a lack of resolution on the debt ceiling, could cause a sharp decline in Bitcoin’s price. However, he noted that BTC appears to be in an accumulation phase, where dips are quickly absorbed.
Greg Cipolaro, global head of research at bitcoin-focused investment firm NYDIG, compared the current market atmosphere to that during the debt ceiling crisis of 2011, indicating a sense of anticipation. Cipolaro stated, “It’s a little bit of calm before the storm right now.” He believes that as negotiations progress, the debt ceiling will eventually be raised, but expects significant market volatility during that period.
In a previous note published on April 21, Cipolaro highlighted that Bitcoin, as a non-sovereign store of value, may be viewed as an attractive investment option for those seeking to protect themselves from the actions of politicians and monetary policy makers.
Ether (ETH), the second-largest cryptocurrency by market capitalization, followed a similar trajectory, experiencing a drop of over 3.5% to hover around $1,788 on Thursday. ETH fell below $1,800 for the first time since late April. Polygon’s MATIC token, based on the Layer 2 blockchain, also declined by over 4%, trading at approximately $0.84. The CoinDesk Market Index (CMI), which measures the overall performance of the crypto market, saw a 3.7% decrease for the day. In equity markets, the S&P 500 and Dow Jones Industrial Average (DJIA) declined by 0.1% and 0.6% respectively, while the tech-heavy Nasdaq saw a 0.1% increase for the day.
