Bitcoin‘s price recently surged to nearly $49,000 but then dropped by $3,000, with the price at the time of writing being around $46,200. The decline raises questions about the cause and what investors can expect next.
Inflation data released today was disappointing, suggesting the Federal Reserve has reasons to maintain a hawkish stance for longer. Strong employment data and wage increases further support this, and with headline inflation rising by 0.2% annually, the Fed may only consider a maximum of 75 basis points cut this year.
Wall Street is getting accustomed to the volatility of cryptocurrencies. They have experience with unstable markets, as seen with the Lehman crisis and inflated housing loans. The drop in Bitcoin’s price could be due to investors taking profits after the GBTC’s ETF conversion led to a drop in its negative premium by -2%.
Finally, it’s worth noting that about 95% of the circulating supply of Bitcoin is profitable, which had been indicating a correction was due. Despite short-term volatility, the medium and long-term outlook remains positive due to continued ETF inflows.
