Key Takeaways
Bitcoin briefly dropped below $90,000 early Monday, for the first time since November after a wild week of trading.Concerns around the Federal Reserve pulling back on rate cuts due to recent economic data may have made bitcoin investors nervous.Adding to investor jitters were reports last week about a federal judge allowing the U.S. government to sell some bitcoin it seized during enforcement actions.MicroStrategy bought 2,530 more bitcoin last week for $243 million, taking its total to roughly 450,000 bitcoins.
Bitcoin (BTCUSD) briefly dropped below $90,000 early Monday, for the first time since mid-November before recovering slightly, after a wild week of trading. Blame that on investor jitters from recent economic data that not even positive spot bitcoin ETF inflows or MicroStrategy’s latest bitcoin buy could shake.
Just last Monday, the cryptocurrency topped the $100,000 price level, before declining to trade around $95,000 over the weekend. Since then, economic data has weakened hopes for rate cuts by the U.S. Federal Reserve which has bitcoin investors on the edge.
Bitcoin’s Fed Woes
In the past, sentiment around future of interest rate policy from the Fed has been a key factor in price movements in both directions for risk-on assets such as bitcoin. This is at least partially due to the increased attractiveness of treasury yields in a high interest rate environment. In lower interest rate environments, investors tend to move to riskier assets in search of higher returns.
While the Fed had already projected that it would slow its pace of rate cuts this year, recent hotter-than-expected labor market data points to an even lower chance of the Fed bringing down rates.
Fears Around Government Selling Bitcoin
Adding to some of those concerns were reports of a federal judge allowing the U.S. Government to sell some of the bitcoin and other cryptocurrencies it seized during enforcement actions. The late December ruling caught public attention last week, as investors began worrying that roughly 69,370 bitcoins worth roughly $6.5 billion last week could hit the market soon, sending bitcoin prices lower.
There can only ever be 21 million bitcoins and the cryptocurrency’s price levels get influenced by sudden demand and supply changes. A sudden influx of bitcoins in the market could in theory drag its price down temporarily. However, some experts said that those worries may be unfounded.
While Glassnode founders recently suggested that the seized currency would likely be auctioned instead of coming to crypto exchanges, CEO of analytics fim CryptoQuant said investors should not panic as the amount of bitcoin in question could be “absorbed in just a week.”
MicroStrategy Continues To Buy Bitcoin
Despite the wild price swings for bitcoin, MicroStrategy (MSTR) and its CEO Michael Saylor remain undeterred. The company announced on Monday its 10th consecutive weekly bitcoin purchase.
MicroStrategy purchased r