Bitcoin (BTC) experienced a drop below the $27,000 mark, reversing its previous gains. Meanwhile, investors continued to assess the ongoing debt ceiling talks in Washington, D.C. and recent regulatory actions.
According to recent data, the leading cryptocurrency by market capitalisation was recently trading around $26,700. This reflected a 2.1% decline over the past 24 hours. Although BTC briefly approached $27,500 earlier on Thursday, a swift pullback in the afternoon brought the price close to $26,400.
Trading range and regulatory clarity for Bitcoin
Edward Moya, a senior market analyst for foreign exchange market maker Oanda, highlighted the uncertainty surrounding Bitcoin’s trading range. In a note on Thursday, Moya stated that investors were awaiting regulatory clarity and the potential for use-case arguments from Wall Street.
He added that if the cryptocurrency’s fundamentals did not improve soon, it could face downward pressure. This would disappoint many investors who have been discouraged by the current trading range.
Data revealed that more than $20 million worth of BTC futures were liquidated within the last four hours. In addition, approximately 87% of them represented long positions, indicating bets on higher prices.
Ether experienced a decline in market value
Following a similar trend, Ether (ETH), the second-largest cryptocurrency by market capitalization, also experienced a decline of 1.6%. It traded at around $1,795 on Thursday afternoon.
The CoinDesk Market Index (CMI), which measures the overall performance of the crypto market, was down by 2.2% on Thursday.
On the equity market front, Thursday’s afternoon session witnessed an upward trend, with a late rally propelling the Nasdaq up by 1.5%, the S&P 500 by 0.95%, and the Dow Jones Industrial Average by 0.35%.
In an interview, Alex Tapscott, the managing director of the digital asset group at Ninepoint Partners, compared Bitcoin’s recent performance to that of a technology stock rather than solely a store of value. Tapscott noted that Bitcoin’s consolidation around the $27,000 to $30,000 range has been apparent this year, coinciding with the catch-up of tech-focused investments like the Nasdaq.
Bitcoin price response to government default
Some analysts speculated that the debt ceiling discussions could favour “safe-haven” assets such as gold and Bitcoin.
However, Tapscott remained sceptical about Bitcoin’s price response in the event of a government default. Noelle Acheson, a market analyst and former head of research at Genesis Trading and CoinDesk, expressed a similar sentiment in her newsletter. She pointed out the potential impact of a debt ceiling raise on monetary liquidity and US government bonds.
Acheson noted that an increase in debt issuance could lead to a shift of funds from cash and risk assets to government bonds. This was particularly so as yields rise to counterbalance the increased supply.
In this scenario, Bitcoin and gold may face downward pressure as both assets tend to decline in price when yields are on the rise.
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