
Table of Contents
Key Takeaways
- After a rollercoaster week of trading, Bitcoin momentarily fell below $90,000 early Monday for the first time since November.
- Bitcoin investors may have been uneasy about the Federal Reserve's potential to halt rate decreases in response to recent economic data.
- Reports last week that a federal judge had permitted the U.S. government to sell some bitcoin that it had seized during enforcement efforts added to investor anxiety.
- Last Monday, MicroStrategy spent $243 million to purchase 2,530 more bitcoins, bringing its total to about 450,000.
After a wild week of trading, Bitcoin (BTCUSD) momentarily fell below $90,000 early Monday for the first time since mid-November before marginally rising again. Even good spot bitcoin ETF inflows and MicroStrategy’s most recent bitcoin purchase couldn’t calm market worries caused by recent economic data.
The price of the cryptocurrency peaked over $100,000 just last Monday, but it fell to about $95,000 over the weekend. Bitcoin investors are on edge because economic data since then has undermined expectations that the U.S. Federal Reserve will lower interest rates.
The Fed's Problems with Bitcoin
In the past, perception regarding the Fed’s future interest rate policies has played a significant role in price fluctuations for riskier assets like bitcoin in both directions. This is at least partly because government yields are more alluring in an environment with high interest rates. Investors typically shift to riskier assets in an effort to increase returns when interest rates are lower.
Recent hotter-than-expected labor market data suggests an even lower likelihood of the Fed lowering rates, even though the Fed had already predicted that it would decrease its pace of rate cuts this year.
Concerns About Bitcoin Being Sold by the Government
Reports of a federal judge permitting the U.S. Government to sell some of the bitcoin and other cryptocurrencies it confiscated during enforcement efforts added to some of those worries. Due to investors’ concerns that around 69,370 bitcoins, valued at approximately $6.5 billion, would soon be put on the market, the late December ruling garnered public attention last week and caused a decline in bitcoin prices.
Only 21 million bitcoins may ever exist, and abrupt shifts in supply and demand affect the price of the cryptocurrency. Theoretically, a rapid surge in bitcoin sales may momentarily lower the price of the cryptocurrency. But according to some experts, those concerns might not be justified.
Although the creators of Glassnode recently hinted that the confiscated currency will probably be put up for auction rather than being sent to cryptocurrency exchanges, the CEO of analytics firm CryptoQuant reassured investors that the quantity of bitcoin in question might be “absorbed in just a week.”
MicroStrategy Is Still Purchasing Bitcoin
Michael Saylor, the CEO of MicroStrategy (MSTR), is unfazed by the wildly fluctuating price of bitcoin. Monday marked the company’s tenth consecutive weekly bitcoin purchase.
Last week, MicroStrategy paid $243 million for about 2,530 bitcoins.
This acquisition, which was funded by the sale of further business stock, raises the total number of bitcoins on the books to around 450,000. At current values, that cache would be worth about $41 billion.
FAQ
Bitcoin fell below $90,000 due to a combination of factors, including investor concerns over the U.S. Federal Reserve’s interest rate policies and the potential market impact of the U.S. government selling seized bitcoin.
Investor uncertainty stemmed from the Federal Reserve’s economic data, which reduced expectations of further rate cuts, and the reports of a federal judge allowing the U.S. government to sell seized bitcoin, potentially flooding the market.
MicroStrategy, led by CEO Michael Saylor, continued its Bitcoin purchases during the dip, spending $243 million to acquire 2,530 bitcoins, increasing its total holdings to around 450,000 bitcoins.
A federal judge permitted the U.S. government to sell some of the bitcoin and other cryptocurrencies it had seized during enforcement efforts. This raised concerns that the sale could temporarily affect the market due to the large amount of bitcoin being sold.
While some experts worry about a surge in bitcoin sales lowering the price, others believe that the amount in question could be absorbed quickly, with little long-term impact on the market.