Cryptocurrencies Pull Back Amid Inflation, Geopolitical Risk (See Latest Prices)
Most cryptocurrencies traded lower on Wednesday as concerns about inflation and geopolitical tensions emanating from Russia’s invasion of Ukraine kept some buyers on the sidelines.
U.S. Federal Reserve Chairman Jerome Powell said on Wednesday the central bank is on track to start raising interest rates this month. “So far, we’ve seen energy prices move up further and those increases will move through the economy and push up headline inflation, and also they’re going to weigh on spending,” Powell said during his testimony before the U.S. House Financial Services Committee.
The Thomson Reuters Core Commodity Index is up 30% over the past six months, retracing roughly 50% of its decade-long downturn. Further, the price of WTI crude oil has risen by 20% over the past week and reached a decade high above $100 per barrel. The surge in commodity prices could point to slower economic growth and greater market volatility.
Meanwhile, Russia continued to mount missile strikes on Ukraine and to advance its troops on Ukraine despite ongoing negotiations. So far, talks between Russian and Ukrainian officials have not led to a ceasefire.
In crypto markets, BTC spot trading volume is starting to decline from the Feb. 24 spike. The ratio of buy-to-sell volume has been neutral.
Still, some indicators have shown a greater capacity to spend among bitcoin traders, which could trigger an increase in buying volume.
●Bitcoin (BTC): $43819, −0.32%
●Ether (ETH): $2949, −0.34%
●S&P 500 daily close: $4387, +1.86%
●Gold: $1929 per troy ounce, −0.71%
●Ten-year Treasury yield daily close: 1.86%
Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.
Stablecoin buying power
Analysts are monitoring signs of potential buying power among crypto traders, which could lead to a rise in BTC’s price.
In down markets, crypto traders typically increase their holdings of stablecoins relative to bitcoin. Stablecoins are a proxy for traditional dollars in crypto markets, and are often used as a vehicle for entering and exiting bitcoin positions.
Theoretically, a decline in the stablecoin supply relative to the total bitcoin supply could eventually reach a turning point, assuming that traders are comfortable with buying on price dips.