Bitcoin falls to lowest level in three months but tightens grip on cryptocurrency market

The world's biggest and best-known digital asset wavered near $25,000 on Thursday

The Bitcoin price chart at the Bithumb exchange office in Seoul, South Korea. Bloomberg

Bitcoin’s share of the value of the cryptocurrency market is at its highest in about 20 months, a sign of the cautious mood in digital assets.

The token wavered near $25,000 on Thursday, giving it a capitalisation of $484 billion – or 45.8 per cent of the value of the more than 10,000 coins tracked by CoinGecko. That is the highest percentage since October 2021.

The US Securities & Exchange Commission, in lawsuits against Binance and Coinbase, last week deemed a series of smaller tokens to be unregistered securities. That designation led to a sell-off in such coins as they could become harder to trade.

In contrast, US officials view Bitcoin as a commodity, helping it to weather the worst of the wider slide caused by the SEC spotlight on “altcoins” such as Binance’s BNB, Cardano’s Ada and Solana’s Sol.

“Traders are more inclined to keep their money off the table in the midst of this regulatory backlash, especially when it comes to altcoins,” said Michael Safai, partner at Dexterity Capital.

The Federal Reserve’s signal that further monetary tightening is likely after a pause in its interest rate increase cycle this month weighed on cryptocurrency sentiment generally.

Bitcoin rose about 2 per cent to $25,470 as of 4.05pm in New York on Thursday, climbing back above the closely watched $25,000 level. It touched its lowest since March earlier.

‘Slippery slope’

“Given Bitcoin has been unable to get off the canvas in recent days, a test of the 200-day moving average is looming,” said Tony Sycamore, a market analyst at IG Australia.

“On that note, it’s imperative that the 200-day holds on a closing basis, otherwise it’s a slippery slope back to $20,000.”

Bitcoin options data from the Deribit cryptocurrency derivatives platform shows an elevated concentration of bearish bets at a strike price of $24,000 for June and September expiries, suggesting that price zone is an important test area.

At the same time, a gauge of implied price swings in the largest digital asset remains depressed.

“Implied volatilities are still very low by historical standards, suggesting the market does not expect major moves at this point,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider OrBit Markets.

Bitcoin has partially rebounded from last year’s cryptocurrency rout. But the 2023 bounce has ebbed to 51 per cent, hamstrung by the US clampdown and ebbing liquidity.