Key Points
- Bitcoin, Jasmy, and Avalanche cryptocurrencies face potential drops due to strong US economic data.
- The economic recovery may lead the Federal Reserve to maintain higher rates for a longer duration.
Bitcoin, Jasmy, and Avalanche, all popular cryptocurrencies, are at risk of further declines. This comes in the wake of the United States releasing robust data on gross domestic product and unemployment claims.
On Thursday, Bitcoin’s price fell nearly 4%, trading at $63,950. Altcoins such as JasmyCoin and Avalanche saw a more significant drop, exceeding 10%. These coins have been on a downward trend for four straight days, reaching their lowest since mid-July.
Effect of US Economic Data
A significant factor in this decline is the ongoing liquidation of Bitcoin from Mt.Gox wallets. Notably, Bitstamp is set to move coins worth $3 billion.
The US economy’s better-than-expected performance presents another risk to Bitcoin, altcoins, and stocks. The Bureau of Economic Analysis reported a 2.8% economic expansion in the second quarter, exceeding the estimated 2.0%. This growth also surpassed the first quarter’s 1.4% growth.
Furthermore, initial jobless claims fell from 245,000 to 235,000 last week, better than the estimated 237,000. This data suggests that the Federal Reserve may maintain higher rates for a longer period.
Implications for Cryptocurrencies
A hawkish Federal Reserve could negatively impact Bitcoin and other altcoins, which typically perform well in a low-interest-rate environment. For instance, Bitcoin reached a record high of $68,000 in 2021 when the Fed reduced interest rates to zero.
More significant rate cuts could prompt investors to shift to riskier assets. This shift could see investors move from money market funds, currently holding over $6.1 trillion in assets, to stocks and cryptocurrencies.
Institutional investors may increase their inflows into Bitcoin and Ethereum following the SEC’s approval of spot BTC and Ether ETFs.
However, altcoins face another risk from technical issues. Bitcoin’s recent retreat occurred after failing to break through a descending trendline. This failure suggests the coin could see further declines as sellers target the critical $60,000 support level.
On a brighter note, Bitcoin has formed a falling broadening wedge pattern, typically an indicator of a bullish continuation. However, any potential upside would require crossing the descending trendline.
