Volatile bitcoin falls from record high as crypto frenzy hits pause

KANCHANARA-UNSPLASH

SINGAPORE – Bitcoin eased to a one-week low in volatile trade on Friday, as investors took profit from its run to a record high and as another upside surprise on US inflation dimmed prospects of early rate cuts there and dented demand for riskier assets.

Bitcoin BTC= fell more than 5% in the Asian session to bottom at $66,629.96, before paring some of its losses to last trade 3.5% lower.

The choppy moves in the world’s largest cryptocurrency came a day after its charge to a high of $73,803.25, setting a new record for a fourth straight day.

“Bitcoin has an established history of getting volatile and ruthless after hitting (a) record high,” said Matt Simpson, senior market analyst at City Index.

“And not only did it recently hit a new high, but it looks like the (Federal Reserve) won’t be as dovish as traders had hoped.”

A slew of data out on Thursday showed that while US retail sales rebounded less than expected in February, producer prices increased more than expected.

The releases came on the heels of U.S. consumer price data out earlier in the week that pointed to still-sticky inflationary pressures.

Markets reacted by paring the chances of a Fed easing cycle beginning in June, with futures now pointing to a roughly 60% chance of a rate cut that month, down from roughly 74% a week ago, according to the CME FedWatch tool.

A higher-for-longer rates scenario, particularly in the United States, is typically bad for risk-sensitive assets such as crypto.

Still, bitcoin BTC= remains nearly 60% higher for the year to date, helped by a crypto frenzy driven by flows into U.S. spot exchange-traded crypto products and as traders remain broadly focused on the prospect of global interest rates being lower by the year-end.

In a show of optimism over bitcoin’s bull run, software firm MicroStrategy MSTR.O said it is planning to raise capital through a convertible bond offering to buy bitcoin for the second time in less than 10 days.

The company had on March 5 announced a $600 million private offering in convertible notes, as it looks to increase its exposure to the booming digital asset.

Some experts say the news also contributed to bitcoin’s volatile moves on Friday.

“Unlike traditional stock markets, the crypto market lacks regulations that limit the impact of influential individuals or entities with concentrated holdings,” said Joshua Chu, chief risk officer at Invess, an AI-enabled algo risk management financial engineering company.

“This absence allows whales to make substantial trades that can trigger cascading effects and rapid price fluctuations, leading to heightened volatility.”

Elsewhere, ether ETH=, the second-largest cryptocurrency, similarly touched a one-week low, and was last down more than 4% to $3,670. – Reuters