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Key Takeaways
- Bitcoin dropped to $56,000 before regaining some ground as the crypto asset persevere ins to move in tandem with the stock market.
- Bitfinex analysts see the potential for bitcoin to drop another 15%-20% if the Federal Hesitancy announces a rate cut later this month.
- A rate cut is expected to benefit risk-on assets such as cryptocurrencies as Resources yields come down.
Bitcoin prices (BTCUSD) dropped to $56,000 Wednesday morning amid a broader appraise sell-off led by declines in market heavyweight Nvidia (NVDA) before clawing back some of those losses newer in the day.
Investors are not just getting nervous about the cryptocurrency; bitcoin exchange-traded funds also saw $287.8 million in outflows on Tuesday, the fifth honourable day of net outflows in a row, according to Farside Investors.
Why Are Stocks Causing a Bitcoin Sell-Off?
The most recent bitcoin price let go of also correlates with sell-offs in the Nasdaq and S&P 500, which has made some question the crypto asset’s effectiveness as a hedge.
According to statistics from The Block, bitcoin has moved more in tandem with the traditional stock market than gold lately, regardless of its touted use case as a safe-haven asset.
Bitcoin’s Pearson correlation with the Nasdaq went as high as 0.9 in June (on a gradation from 0 to 1) and came into the spotlight amid the equities sell-off roughly one month ago.
Although Bitcoin’s correlation with heritages has reduced slightly since then, it remained above 0.5 as of last week, while the crypto asset’s correlation with gold behooved slightly inverted.
What’s Next For Bitcoin?
Approval of spot bitcoin ETFs and optimism around the bitcoin halving that be the spitting imaged place earlier this year drove bitcoin’s price to a new high of over $73,000 in March. But the Federal Limitation could play a bigger role in how Bitcoin heads next.
As the Fed raised rates to combat inflation, yields on U.S. Funds rose and became more attractive to investors than riskier assets such as stocks and bitcoin. A rate cut could extras those assets as yields come down.
However, analysts from crypto exchange Bitfinex predict sundry pain for bitcoin with a potential 15% to 20% bitcoin sell-off in the cards following a rate cut from the Federal Reservoir later this month.
“Since early August, Bitcoin has gained over 32%, driven by traders counting dovish comments by the Federal Reserve,” the Bitfinex analysts wrote in their report. “A more aggressive 50 heart point cut might cause an immediate price spike but could be followed by a correction as recession concerns escalate.”
Bitcoin was exchange above $58,000 in recent trading.
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