Bitcoin continues to recover and jumps above the $43,000 level
Bitcoin responded well towards the end of September trading to the latest price drop at…
Bitcoin rebounded again on Wednesday (June 9) after El Salvador’s parliament voted to legalize the cryptocurrency, rising to $34,300, 11% more than Tuesday (June 8).
Over the course of this week, crypto trading volumes continued to decline over the weekend, but the Bitcoin price remained close to the middle of the recent divergence level of $36,000, and the uncertainty around bitcoin’s development kept individual traders out of the market.
As of Tuesday morning, as the price of the leading cryptocurrency fell overnight and stopped to trade above $32,500 after trading as high as $36,700 on Monday afternoon, over the course of the 24-hour period, the world’s leading cryptocurrency lost about 11% of its value.
Ethereum also fell about 10% to below $2,500 after briefly above $2,800 on Monday, with most cryptocurrencies dropping double in 24 hours.
The drop comes after about a week of relative silence in the crypto market with most of the leading assets trading in a tight price range.
The biggest catalyst for Wednesday’s ground-breaking cryptocurrency price movements was the decision of El Salvador’s parliament to pass a bill making the currency legal cash.
However, the impact of such a move would be relatively insignificant, given that El Salvador is a relatively small country with a population of just over 6 million and has a GDP of over $27 billion, which is a relatively small amount from a global point of view.
The new law means that businesses will now be allowed to display their prices in Bitcoin, and similarly, residents can pay their taxes using the currency. However, the US dollar will remain the dominant currency in the country. It is still too early to tell if other countries will follow El Salvador and adopt the currency.
Factors influencing the market ranged from El Salvador’s recognition of bitcoin as legal cash, to China’s Weibo which bans a slew of key opinion leaders in the crypto space, Elon Musk has also been busy on his social media channels, but his recent tweets have had no effect.
Recent comments from US Federal Reserve officials suggest that the world’s largest central bank may soon decide to reduce its asset purchases.
Asset purchases from the Fed, currently around $120 billion per month, have been supplying markets with liquidity, driving up stock prices, and prompting investors to look for other assets to hedge against rising inflation expectations.
Some investors who put their money into the cryptocurrency market may decide to withdraw now, which may explain the new decline in the price of Bitcoin
Bitcoin price is also rising ahead of US inflation data to be released on Thursday, and the numbers are expected to show a continued rise in consumer and producer prices in May.
The stronger numbers expected will increase the likelihood that the Fed will start changing its tone on interest rates and quantitative easing as the labor market continues to tighten.
Rising interest rates and caution are often seen as bearish for Bitcoin and other riskier assets, the logic being that if the leading digital currency rose when the Fed was going down, then the opposite would happen when the tightening started.
Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.
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