Fears Around Stock Market Volatility Dragging Crypto Prices Even Lower
There are apparently many different flavors of crypto market corrections. Once more, the entire crypto space experienced an overall loss of value, running in tandem with the general unease of the traditional market space. This unease has been spreading around ever since the 10-year US Treasury bonds saw an impressive spike in interest rate.
Another Dip For BTC
Bitcoin (BTC) fell to a new low of $44,710 on the 25th of February, 2021, before key support levels were reached and buying could resume. From there, the world’s biggest cryptocurrency managed to return to above the $46,500 range, currently trading for around $47,367. Analysts all around are speculating that the support will hit $50,000 once more before the ongoing bull run will continue.
As lovely as it is to have big names like Tesla, Microstrategy, and MassMutual all buying in big with crypto, other major institutions are still rather hesitant about the crypto asset, citing concerns over tax and security treatment. This was revealed by Damien Vanderwilt, the co-president of Galaxy Digital.
US Treasury Dropping A Surprise For The World
Even with many institutions not really feeling safe in using it, institutional adoption within the crypto space has been a massive positive sentiment source within the crypto markets at large.
Some say that this alone has caused Bitcoin’s market cap to soar above the $1 trillion market cap for a brief moment in time, while others claim they had nothing to do with it, and it’s the whales and retail investors that still has the say. What can be said is the fact that institutional validation certainly helps inspire retail investors to think Bitcoin is a valid investment choice.
As for what caused this latest volatility spike in the stock and crypto market, the finger can be pointed at the US Treasury and its 10-year bonds. The bond’s interest rate saw a 1.52% spike, which is the highest it’s been in over a year.
Everything’s Connected
Chad Steinglass stands as CrossTower’s Head of Trading, and had a few things to say about the matter at large. He explained that the move from the US has caused market-wide pressure in Grayscale Bitcoin Trust (GBTC). This, in turn, caused a premium as low as -6%, closing up at -2% today. According to Steinglass, as long as there is interest rate volatility, there will be market-rate volatility. This causes the USD to be pushed lower amid a steepening long end of the curve.
As for how this could affect the crypto space, a prime suspect would be a liquidity scramble. With deteriorating equity markets, the crypto markets saw even more pressure as crypto investors were trying to push up margin calls and free up some cash.
With this in mind, Steinglass speculated that it could be either the retail or the institutional side of things, as both sides would find the need for quick liquidity rather pressing.