Bitcoin had its worst month since the FTX exchange crashed in November as the crypto comeback falters. Bitcoin’s first monthly decline of 2023 was 7.6% in May. The top 100 digital asset index fell similarly. The largest crypto coin rose 84% from the start of the year to mid-April, momentarily reaching $31,000, but has subsequently dropped to 64%. Liquidity and monetary policy have dampened crypto excitement.
The failure of US regional banks in March fueled Bitcoin growth, but regulators stabilised the financial sector. “What you really need to do to get another wave of Bitcoin and crypto-asset buying is to show real utility and development to get those crypto curious people to get into the crypto ecosystem,” Ava Labs Inc. president John Wu told Bloomberg Television.
Meme coins and nonfungible tokens have been active on Bitcoin this year. Blockchain congestion and transaction fees spiked in May, pressuring Bitcoin. Over the past four weeks, stocks, bonds, and gold outperformed bitcoin. An index of AI-linked shares rose over 10% due to artificial intelligence hype. “Crypto is losing out to tech stocks that have a stronger narrative with the AI and ChatGPT stories driving investor interest,” said Matrixport head of research Markus Thielen. He said meme coins like Pepe had “very low” turnover, indicating investor disinterest.
Traders are also assessing the US debt-limit deal, which Congress is rushing to adopt before June 5, the deadline for default. If the arrangement passes, bill sales might drain market liquidity. Caroline Mauron, co-founder of digital-asset derivatives liquidity provider OrBit Markets, stated that liquidity consequences are increasingly noticeable over longer periods. The deal’s large Treasury issuances are unlikely to affect Bitcoin’s price in the medium future. Bitcoin lost 2.4% to $27,117 at 5 p.m. in New York on Wednesday. Ether, Solana, and Avalanche also declined. After recovering from last year’s fall, Bitcoin is $42,000 behind its 2021 peak.
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