all41author Bitcoin slipped below $40,000 for the first time in a month while ether lost 6% Monday
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Bitcoin and ether extended losses Monday while stocks traded sideways ahead of next week’s Federal Reserve meeting.
Bitcoin slipped below $40,000 for the first time in a month, putting the cryptocurrency around 7% lower in the past week. Ether (ETH) similarly faltered, trading around 6% lower over 24 hours on Monday to around $2,330.
While the launch of bitcoin ETFs coinciding with a decline in bitcoin’s (BTC) price may be perplexing to traders, some analysts attribute some of the decline to outflows from Grayscale’s product, which means the trust is holding less bitcoin.
Read more: Bitcoin slips to nearly retest $40K even as tech stocks roar
As of Friday, Grayscale’s Bitcoin Trust, which converted into an ETF earlier this month, held just under 567,000 bitcoin, according to disclosures. At the end of December 2023, the trust held around 619,000 BTC.
Others say cryptocurrency’s general price decline is indicative of a broader risk-off trend as we head into the first Federal Open Markets Committee meeting of the year later this month. The Fed has already signaled that rate cuts may not come as swiftly or aggressively as markets had hoped.
“This feels like a broad market reset as traders move to de-risk,” Noelle Acheson, author of the “Crypto is Macro Now” newsletter, said. “More volatile assets are being hit even harder, as shown by the climb in bitcoin’s market dominance — when BTC.D heads up as prices head down, we’re seeing a rotation into the relative ‘safety’ of the market’s largest and most liquid asset.”
Read more: GBTC’s asset bleeding to blame for week of flat crypto product flows
Stocks also struggled to break out Monday, although the S&P 500 and Nasdaq Composite indexes did manage to close the trading session in the green. Analysts say there is reason to believe the early rally we have seen so far this year — the S&P 500 and Nasdaq Composite are up 2.3% and 4% year-to-date, respectively — could continue.
“[Last week], the actual news was more bad than good, yet stocks rallied and that tells us that momentum is still on the bull’s side, technicals are positive and the path of least resistance is higher,” Tom Essaye, founder of Sevens Report Research, said.
Essaye cautioned, however, that there isn’t a lot of support right now for equities, and a substantial correction is only one hawkish-Fed comment away.
“As far as chasing the market at these levels, I don’t think it’s the best time to do so based on the fact that I can’t point to much that will push stocks higher in the medium term other than momentum,” he said. “I can point to numerous events that could cause a 5%-ish correction, quickly.”
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