Bitcoin witnessed a decline on Monday as investor sentiment towards cryptocurrencies remained tepid, influenced by prospects of prolonged higher U.S. interest rates, alongside alterations to collateral regulations by the DTCC, posing additional challenges for the crypto market.
Over the past 24 hours, Bitcoin experienced a 2.5% drop, settling at $62,314.6 by 01:37 ET (05:37 GMT), nudging closer to the lower threshold of its established trading range of $60,000 to $70,000 since mid-March.
DTCC’s Policy Change Impacts Crypto Landscape
The Depository Trust & Clearing Corporation (DTCC), a significant player in private financial markets clearing and settlement services, announced the cessation of collateral allocation to exchange-traded funds and other investment vehicles with exposure to Bitcoin and cryptocurrencies. Effective from April 30, this development dampens crypto’s appeal, traditionally a popular avenue for speculative activities.
Bitcoin Prices Affected by Rate Apprehensions
The DTCC’s decision exacerbated Bitcoin’s ongoing downturn, compounded by apprehensions surrounding sustained U.S. interest rates, which have been exerting downward pressure on the cryptocurrency in recent sessions. Bitcoin and the broader crypto market typically thrive in low-rate, high-liquidity environments.
The release of hotter-than-anticipated PCE price index data, the Federal Reserve’s preferred inflation gauge, further intensified pressure on crypto markets. Persistent inflation concerns have hindered the central bank’s inclination towards rate cuts, with recent inflation metrics failing to instill confidence in rate reduction prospects.
Attention now turns to the forthcoming Federal Reserve meeting for insights into the trajectory of interest rates, with prevailing expectations leaning towards a status quo on rates. However, forecasts suggest potential rate cuts may commence as late as September or the fourth quarter.
Altcoins Mirror Bitcoin’s Losses
In tandem with Bitcoin’s decline, major altcoins also registered losses, reflecting the prevailing subdued sentiment towards cryptocurrencies. Ethereum, the second-largest cryptocurrency by market capitalization, recorded a 3.4% decrease to $3,202.01, while XRP and Solana witnessed declines of 3% and 4.5%, respectively.
Limited Uptake in Crypto Amidst Tech Stock Gains
Despite notable gains in technology stocks following robust earnings reports from U.S. tech giants Microsoft Corporation and Google parent Alphabet Inc, the crypto market exhibited minimal reaction. Historically correlated with U.S. tech stocks, recent months have seen a divergence in this relationship, with crypto prices displaying restrained upside amidst tech sector rallies.
Rather, risk aversion sentiments in the tech industry have translated into extended downturns in the crypto market in recent sessions.
