Apr 29 2024: Bitcoin faced a decline on Monday as the overall sentiment towards cryptocurrencies remained pessimistic due to expectations of higher U.S. interest rates and recent changes in collateral rules by the DTCC, posing challenges for the crypto market.
Over the past 24 hours, Bitcoin dropped by 2.5% to reach $62,314.6, moving closer towards the lower end of its trading range of $60,000 to $70,000, which has been established since mid-March.
DTCC’s Decision on Bitcoin Collateral
The Depository Trust & Clearing Corporation (DTCC), a significant player in financial markets clearing and settlement services, announced that it would no longer allocate collateral to exchange-traded funds or investment funds with exposure to Bitcoin and crypto, effective from April 30. This decision has dampened the attractiveness of crypto assets, often favored for speculative trading.
Rate Concerns Weigh on Bitcoin
The DTCC’s decision compounded the downward pressure on Bitcoin, which was already experiencing losses in recent days. The looming prospect of higher U.S. interest rates has been a major factor affecting Bitcoin and the broader crypto market, as these assets tend to thrive in a low-rate and high-liquidity environment.
Moreover, the release of hotter-than-expected PCE price index data, the Federal Reserve’s preferred inflation gauge, added to the negative sentiment in crypto markets. The Fed’s cautious stance on rate cuts, driven by persistent inflation concerns, has further weighed on investor confidence in crypto assets.
Focus on Fed Meeting for Rate Clues
Investors are eagerly awaiting the upcoming Fed meeting for more clarity on interest rates. The consensus is that the central bank will maintain rates at the current level, with expectations of potential rate cuts only in September or later in the year.
Altcoins Follow Bitcoin’s Lead
In line with Bitcoin’s decline, major altcoins such as Ethereum, XRP, and Solana also experienced losses, reflecting the overall subdued sentiment in the crypto space. Ethereum dropped by 3.4% to $3,202.01, while XRP and Solana recorded losses of 3% and 4.5%, respectively.
Despite gains in technology stocks, which usually influence crypto prices, the recent correlation between tech and crypto markets has shifted, with tech gains having limited impact on crypto prices. Instead, risk-off sentiment in the tech sector has contributed to extended declines in crypto assets in recent sessions.
