The Bitcoin price fell around 3% in a few minutes on Wednesday to $29,010 and Ethereum fell 5% to $1,977.
It seems the crypto market is back in volatility mode.
The world’s largest cryptocurrency by market capitalisation has been on a tear since the beginning of the year, having gained more than 60% in value since January.
What, then, is happening to cause Bitcoin to retreat?
It’s likely to be down to two key reasons. First, normal market correction after the impressive rally as investors indulge in some profit-taking. And second, investors could be offloading as inflation remains stubbornly high in major economies such as the UK and US, meaning that central banks could be heading for more aggressive moves towards higher interest rates than what the market had been pricing-in.
On Wednesday, figures revealed that UK inflation, fell to 10.1% in the year to March from 10.4% in February – but it had been widely expected to fall below 10%, and food prices are rising at their fastest rate in 45 years. Still in double digits and significantly higher than the Bank of England’s 2% target will, of course, fuel speculation about further rate hikes.
Meanwhile in the US, Atlanta Federal Reserve President Raphael Bostic told CNBC on Tuesday that he anticipates one more 25 basis point interest rate increase and then a hold “for quite some time.”
All this, we expect, is the catalyst for the current volatility in crypto.
But, as ever, this turbulence is being welcomed by many who will be using the lower prices as a reason to increase their holdings.
Trader ‘Crypto Kaleo’ remained bullish. “Remember dips are gifts,” he told Twitter followers, branding the retracement “beautiful”.
The so-called Bitcoin whales (those who own 100 to 1,000 Bitcoins) are also going in for a feeding frenzy it seems.
Over the last two days, this cohort has added more than 20,000 Bitcoins, according to data from Santiment: “Whale addresses holding 100-1k $BTC are back in accumulation mode after the month-long dump. 20,007 $BTC has been added in the past 2 days.”
Once again, it would appear that panic-sellers are feeding these whales who are viewing the current Bitcoin price dips as discounts.