Bitcoin experienced a second consecutive day of decline at the outset of the new month and quarter, influenced by escalating Treasury yields and the robustness of the U.S. dollar.
The leading cryptocurrency plunged by more than 4.76% on Tuesday, settling at $66,134.00, marking a two-day loss of 7%, as per Coin Metrics. At its lowest point, it dipped to $64,572.00.
On Monday, the cryptocurrency traded around $70,000 until data revealed growth in the manufacturing sector for the first time since September 2022, coupled with dwindling investor expectations of June rate cuts. Bitcoin now stands below its all-time high, achieved on March 14, by approximately 11%.
Ether followed suit, declining by 5.6% to reach $3,240.27.
Simultaneously, the 10-year U.S. Treasury yield surged to its highest level of the year, while the dollar, inversely correlated with bitcoin, soared to a five-month peak.
“Bitcoin doesn’t need much excuse to go through a period of correction after such an explosive performance in Q1,” remarked Joel Kruger, market strategist at LMAX Group. “Having said that, U.S. economic data has been stronger of late, all while inflation continues to be a concern. This has resulted in a repricing of Fed expectations, translating to broad-based U.S. dollar demand on the more attractive U.S. dollar yield differentials.”
The downturn in Bitcoin’s price might have been exacerbated by a significant transfer of over 4,000 bitcoins to the Bitfinex exchange by a large bitcoin holder, or “whale,” late Monday night. Data from CryptoQuant indicates a surge in the exchange’s reserves—typically signaling increased selling activity—coinciding with the sudden bitcoin price drop late Monday night.
Stocks linked to bitcoin’s performance witnessed declines but managed to recover from their lows by the end of the day. Coinbase, a crypto exchange, witnessed a 2% decline, while MicroStrategy, a software provider largely tied to bitcoin’s price, lost 3%. Major mining stocks like Marathon Digital and Riot Platforms slid by 8% and 7%, respectively. CleanSpark, one of the top-performing miners this year, witnessed a 9% decline.
April could prove to be turbulent for cryptocurrencies and related stocks, especially mining stocks. Investors are eyeing the bitcoin halving event, which will halve the reward and consequently revenue of bitcoin miners, in the latter half of the month. While this event could adversely impact miner performance, historically, it has set the stage for bitcoin rallies exceeding 300% in the ensuing months.
Despite recent fluctuations, Bitcoin remains up by 55% for the year 2024.
