It is important to note that Bitcoin and many altcoins are increasingly behaving like risk on or speculative assets often moving in tandem with equity markets. When there are macroeconomic uncertainty or liquidity concerns, institutional risk appetite wanes. When this happens, high risk assets are sold off in a bid to derisk and as a result crypto prices correct to offset the sells even if safe haven metals rally.
Also, crypto markets remain more leveraged and fragmented unlike traditional markets. The crypto market’s significant use of leverage means that sharp price drops may trigger cascading liquidations. As a result, when large liquidations occur or when there is concentrated whale selling, price declines are accelerated.
Also, the prospect of higher for longer interest rates which are driven by persistent inflation and central bank signaling tends to dampen demand for speculative assets like cryptocurrencies. Higher interest rates tend to increase the opportunity costs of holding yielding or high volatility assets. Shifts in sentiments due to broader economic uncertainty and prevailing risky off sentiments, can also prompt investors to exit highly volatile crypto markets in favour of perceived safe havens like gold.
We must also understand the fact that crypto markets are highly sensitive to changing regulatory clarity and ETF narratives as well as conflicting signals. Conflicting signals may include positive institutional flows in some pockets of the market while there are also systematic concerns or rise in volatility. This is a recipe for seriously choppy price action that is a nightmare for short term traders and investors even when metals are rallying.
