Investing.com– Bitcoin pulled back sharply to around $121,000 on Wednesday after hitting record levels above $126,000 earlier this week, as profit-taking intensified and strength in the U.S. dollar challenged “debasement-trade” flows.
The world’s largest cryptocurrency last traded 2% lower at $121,449.3 by 02:22 ET (06:22 GMT).
The token had surged to an all-time high of $126,186.0 on Monday, underpinned by heavy inflows into Bitcoin exchange-traded funds (ETFs) and speculative positioning betting on fiat currency weakness during a protracted U.S. government shutdown.
Bitcoin retreats as stronger dollar, shutdown caution weigh
The US Dollar Index jumped to a three-week high on Tuesday as investors sought safety amid worries that the government shutdown, now entering its second week, could disrupt data releases and complicate the Federal Reserve’s policy outlook.
Bitcoin’s earlier rally was fueled by optimism over sustained ETF inflows, which have provided new channels for institutional investors to gain exposure to the token.
Reports also cited “debasement trades” — bets that the fiat currency would weaken amid rising fiscal uncertainty — as a key driver behind Bitcoin’s move to fresh records.
However, as the dollar strengthened and Treasury yields remained elevated, markets questioned the sustainability of those bets.
With key releases delayed, market focus is now on minutes from the Fed’s latest meeting and comments from Chair Jerome Powell later this week.
Crypto stocks decline tracking Bitcoin’s decline
Crypto-linked stocks slumped on Tuesday as Bitcoin’s retreat weighed on sentiment across the sector.
Shares of Strategy Inc (NASDAQ:MSTR) tumbled about 7%, while Coinbase Global (NASDAQ:COIN) shares fell 4%.
Bitcoin mining names also suffered, with Marathon Digital (NASDAQ:MARA) dropping 4%, and Riot Platforms (NASDAQ:RIOT) declining 3%.
Crypto price today: most altcoins drop, Ether slips 5%
Most altcoins also saw extended losses on Wednesday amid a broader risk-off mood.
World no.2 crypto Ethereum dropped 4.8% to $4,442.85.
World no. 3 crypto XRP slipped 4% to $2.85.
Solana slumped 5%, while Cardano tumbled 5.2%, and Polygon lost 3.6%.
Among meme tokens, Dogecoin plunged 6%, while $TRUMP retreated 4%.
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