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On Wednesday at 11 a.m. EDT, bitcoin hovered just around the $65,000 mark. QCP Capital published its market commentary, attributing the downturn in the crypto economy to a lack of news flow and stagnant markets. In such a market, with minimal positive news to spur buying, existing crypto holders may lose confidence and patience.
Crypto Sentiment Sours as ‘Boring Markets Shake Out Weak Hands’
Bitcoin prices have seen better days; the crypto asset’s value is down 6% against the U.S. dollar over seven days and more than 8% over the past fortnight. Markets have been rangebound and finding lower lows over recent weeks. On Wednesday, QCP Capital noted that the sell-off began after the latest Federal Open Market Committee (FOMC) meeting.
“While [bitcoin] seems to have sneezed, [alternative cryptocurrencies] seemed to have caught a cold as they dropped 20-30% over the weekend,” the crypto firm said. QCP added:
We attribute this weakness in [major cryptocurrencies] to a lack of news flow. Boring markets usually shake out weak hands, and nobody likes to pay 11% annually to hold a long position in [perpetual contracts].
In the realm of cryptocurrencies like bitcoin and other digital assets, news flow plays a crucial role in shaping market sentiment and trading behaviors. When there is a scarcity of significant news or developments, trading volume may decline, leading to diminished interest from both retail and institutional investors. This decreased engagement can result in stagnant price movements, as fewer traders take positions based on anticipated news-induced volatility.
The most recent news driver was the approval of spot ethereum (ETH) exchange-traded fund (ETF) filings. However, the listing of these funds has not progressed as quickly as the spot BTC ETFs. Some predict a rather uneventful summer with no substantial market action until the ether-based ETFs begin trading.
As QCP Capital disclosed, investors with leveraged positions might be hesitant to maintain them due to high annual holding costs (around 11%), especially if market returns are insufficient to cover these expenses. Consequently, a mix of low trading activity and pressure to exit leveraged positions can further depress prices in an already quiet market.
What do you think about QCP citing lack of news flow and boring markets to the recent crypto downturn? Would you agree with that assessment? Share your thoughts and opinions about this subject in the comments section below.