• The Bitcoin price has dropped below $29K, and this should not be a surprise given the fixed supply and lack of dividends or earnings.
• Liquidity in the market is thin, with 45% of stablecoins leaving exchanges in the last 4 months.
• Correlation with stocks remains high, with UK inflation creating pause for thought on interest rate cuts which have impacted Bitcoin’s price.
Bitcoin Price Drops Below $29K
The Bitcoin price has dropped from its all time highs above $30K to close to $28K, and this should not come as a surprise given its fixed supply and lack of dividends or earnings. This means that the Bitcoin price is entirely demand-driven.
Thin Liquidity In The Market
Liquidity in the Bitcoin market is currently quite thin, with 45% of stablecoins leaving exchanges in the last 4 months. This can exagerate every move that occurs in the market due to the reduced amount of capital available to buy and sell.
Correlation With Stocks Remains High
The correlation between stocks and Bitcoin remains high, particularly with UK inflation creating pause for thought on any potential interest rate cuts that may occur in future periods. As such, any news regarding interest rates can have an effect on Bitcoin’s price movements as well as traditional assets.
Market Peeling Back On Forecasts For Interest Rate Cuts
The market has also been peeling back slightly on forecasts for any potential interesst rate cuts in future periods which appears to have had an impact on BTC prices over recent days too.
Conclusion
In conclusion it appears that understanding what drives changes in bitcoin prices is still quite difficult as there are no dividends or earnings reports driving it’s movements but rather it appears to be driven by sentiment around liquidity levels, macroeconomic events such as inflationary pressures and speculation surrounding possible interest rate cuts from central banks going forward