Broader crypto prices were also pressured by uncertainty over U.S. interest rates, after several Federal Reserve officials signaled this week that the central bank was more likely to keep rates unchanged in 2024. The dollar rebounded from recent losses after their comments.
Bitcoin fell 1.8% in the past 24 hours to $62,336.7 by 08:21 ET (12:21 GMT). The world’s largest cryptocurrency remained comfortably within a trading range seen for most of the past two months, as momentum in the token waned after it hit a record high in March.
Capital flows data released earlier this week also showed that crypto investment products, particularly Bitcoin, saw a third straight week of steep outflows as hype over exchange-traded funds launched earlier this year ran dry.
A report released earlier this week showed that over 90% of transactions in stablecoins- which are an important aspect of crypto trade- were inorganic and not from real users, raising questions over just how much retail demand there actually was for crypto.
The report also raised concerns over more regulatory action against stablecoin operators, specifically Tether, which is the largest of the lot.
In instances of actual regulatory action, trading app Robinhood Markets Inc (NASDAQ:HOOD) said it was facing potential regulatory action from the Securities and Exchange Commission over the nature of crypto tokens traded on its platforms. The SEC has long argued that crypto tokens are securities, and is currently embroiled in legal battles with XRP issuer Ripple and crypto exchange Coinbase (NASDAQ:COIN) over the matter.
The SEC is also reportedly investigating world no. 2 crypto Ethereum over it potentially being a security, and had this week postponed a decision to approve spot-traded Ethereum ETFs for U.S. markets to July.
But the regulator is widely expected to reject applications for the ETF.
Broader cryptocurrency prices retreated, also coming under pressure from a resurgence in the dollar as Federal Reserve officials said the central bank was likely to leave interest rates unchanged this year.
Ethereum fell 2.5% to $2,996.41, while Solana and XRP fell 6.1% and 2.7%, respectively.
High for longer U.S. rates bode poorly for crypto markets, given that the sector usually benefits from a low-rate, high-liquidity environment.
A Bitcoin price indicator known as volatility risk premium (VRP) currently indicates a relatively calm market environment ahead, which long-term investors might view positively, CoinDesk reported Wednesday.
The VRP measures the difference between an asset’s option-implied volatility, which gauges expected price swings, and the realized volatility over time. This spread reflects the extra premium option sellers seek to offset the risks of future market uncertainty.
According to data from Bitfinex analysts, the one-month VRP has sharply declined from 15% to 2.5% following the Bitcoin blockchain’s mining reward halving on April 20. The calculation relies on the difference between Volmex’s bitcoin 30-day implied volatility index (BVIV) and the one-month realized volatility (VBRV).
“The significant narrowing of the VRP indicates a realignment of market expectations to a more stable and predictable environment post-halving,” analysts at Bitfinex said in a note seen by CoinDesk.
“The market consensus seems to be that future volatility may be less than previously anticipated following the halving.”
Put differently, uncertainty has diminished, and market participants anticipate more stable market conditions.
Source: Cryptocurrency - investing.com
