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By Francisco Rodrigues (All times ET unless indicated otherwise)
Bitcoin BTC$68,747.00 slipped to $68,500 on Tuesday, having failed to reclaim $70,000 after trading above that level for a while over the weekend. The CoinDesk 20 Index (CD20) dropped 0.23% over the past 24 hours.
The market appears to be stabilizing after last week’s decline to $60,000, which erased all the cryptocurrency’s gains since Donald Trump’s presidential election victory in November 2024.
The slide prompted over $2.7 billion in liquidations, flushing out leveraged positions. It may not, however, have reflected a fundamental change in the crypto market. Rather, it might have been tied to declining liquidity in the broader financial ecosystem.
Raoul Pal, CEO of Global Macro Investor, said last week’s selloff across crypto and tech stocks stemmed from temporary drains in U.S. dollar liquidity tied to Treasury operations and government funding dynamics.
And then there’s artificial intelligence (AI). Investments in that technology have been “absorbing available capital for months at the expense of everything else,” Wintermute wrote in a note. The trading firm wrote that stripping AI companies from the Nasdaq 100 index sees crypto’s negative skew nearly disappear.
“The underperformance during rallies and amplified selling during drops is almost entirely explained by AI rotation,” Wintermute OTC trader Jasper De Maere wrote. “For crypto to outperform again, air needs to come out of the AI trade.”
Elsewhere, Japanese government bond yields, which rose after Prime Minister Sanae Takaichi’s decisive election victory at the weekend, are dropping. That could avoid further unwinding of the yen carry trade, which might have seen up to $5 trillion invested overseas moving back to the country.
Arthur Hayes, a co-founder of crypto exchange BitMEX, pointed to Takaichi’s victory as a potential catalyst for the yen to lose value against the dollar, making the Japanese currency a less attractive investment. That could be a boon for risk assets, including cryptocurrencies.
Still, prices are likely to remain rangebound for the time being. The Coinbase Premium Index, which measures demand from large U.S. investors on the exchange, remains negative, and spot bitcoin ETF flows also show hesitation, with daily net inflows coming in at just $145 million yesterday.
“While retail spreads attention across other asset classes, institutional flows through ETFs and derivatives now seem to dictate direction,” Wintermute wrote. Stay alert!
Read more: For analysis of today’s activity in altcoins and derivatives, see Crypto Markets Today
For a more comprehensive list of events this week, see CoinDesk’s “Crypto Week Ahead”.
For a more comprehensive list of events this week, see CoinDesk’s “Crypto Week Ahead”.
For a more comprehensive list of events this week, see CoinDesk’s “Crypto Week Ahead”.
