Bitcoin shows signs of slight recovery after a deep decline lasting two and a half weeks, but still maintains a low price.
The main reason is due to higher-than-expected wholesale inflation data in the United States, leading to diminished expectations of interest rate cuts from the Fed. Additionally, short-term investors taking profits and the announcement of limitations on Bitcoin purchases from the U.S. Treasury's strategic reserves also negatively impact the market.
MAIN CONTENT
Bitcoin is currently in a correction phase after its most recent peak.
High wholesale inflation in the U.S. puts downward pressure on Bitcoin's price.
The policy of not expanding strategic Bitcoin reserves also diminishes upward price momentum.
What phase is Bitcoin currently in the market?
Bitcoin is currently in a price correction phase after reaching a recent record high, reflected by a slight recovery but still maintaining a low level compared to the peak.
Strategist Joel Kruger from LMAX Group analyzes that Bitcoin has entered 'correction mode' since last week. This phenomenon is commonly observed when the cryptocurrency market undergoes cycles of increases and decreases to refresh trend strength. This decline reflects investor caution in light of new economic data and policy information from the U.S.
How does wholesale inflation data in the U.S. affect Bitcoin?
The higher-than-expected U.S. wholesale data has weakened expectations for the Federal Reserve's (Fed) ability to cut interest rates in the near future, putting downward pressure on Bitcoin.
Rising inflation increases concerns about tightening monetary policy, leading capital to flow out of risky assets like cryptocurrencies. This recently published statistic has eroded investors' confidence in Bitcoin's short-term growth prospects while allowing the selling side to dominate.
What other factors affect Bitcoin's price volatility?
In addition to inflation, short-term trading accounts taking profits also contributed to the recent sell-off. Furthermore, the U.S. Treasury has stated that it will not expand strategic Bitcoin reserves through new purchases.
The failure to reinvest or purchase more Bitcoin from the strategic reserves reduces significant demand from the government, impacting the market in terms of sentiment and liquidity. At the same time, this move encourages individual and institutional investors to consider carefully before investing further in Bitcoin.
Bitcoin has gone through a correction phase after reaching its peak, mainly due to macroeconomic factors and new policies from the U.S. Treasury.
Joel Kruger, LMAX Group Strategist, August 2023
Frequently Asked Questions
Is the decline in Bitcoin's price due to U.S. monetary policy?
Yes, high wholesale inflation data and the Fed's interest rate adjustment expectations negatively affect Bitcoin's price.
Is it important that the U.S. Treasury does not purchase more Bitcoin?
Yes, this is a sign of decreased demand from the government, causing the Bitcoin market to lack growth momentum.
Will Bitcoin quickly recover after this correction?
The recovery potential depends on the next macroeconomic factors and investor sentiment in the cryptocurrency market.
How to mitigate risks when Bitcoin experiences strong fluctuations?
Investors should closely monitor economic indicators, adhere to risk management, and allocate portfolios wisely.
What is a correction in the cryptocurrency market?
A correction is a temporary price decline after a strong increase aimed at stabilizing and creating new momentum for the next trend.
Source: https://tintucbitcoin.com/bitcoin-giam-do-chot-loi-fed-yeu/
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