The cryptocurrency market corrected lower on Tuesday following Monday's breakout performance that saw Bitcoin (BTC) hit a two-year high above $50,000 as anticipation for the halving in late April builds.
Stocks also trended lower as the latest Consumer Price Index (CPI) report showed that the rate of inflation in January was higher than expected, with the headline reading showing an annual increase of 3.1%, while the month-over-month change in core inflation was 0.4%, the largest monthly rise since April 2023.
The major indices traded in the red for the majority of the day, with the S&P, Dow, and Nasdaq closing down 1.37%, 1.35%, and 1.80%, respectively.
Data provided by TradingView shows that Bitcoin initially responded negatively to the CPI print, falling from support at $50,000 to hit a daily low of $48,335 in the early afternoon. Bulls have since rallied the troops and pushed the top crypto back above support at $49,400.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $49,460, a decrease of 1% on the 24-hour chart.
ETF demand outpaces supply
While many analysts have been warning about the potential for Bitcoin to experience a deeper pullback, analysts at AllianceBernstein are long-term positive on its price outlook ahead of the halving in April and the price appreciation that has historically followed the quadrennial reduction in new supply.
“We think the best days of Bitcoin are ahead, and the ETF-led Bitcoin market is poised for what we expect to be a FOMO rally," analysts Gautam Chhugani and Mahika Sapra wrote in a note circulated to clients on Monday.
The analysts noted that the spot ETF was quickly priced into the market after launch but said that traders have yet to price in the supply crunch that will come with the halving and think it will kick off a round of FOMO as investors chase the anticipated gains.
They predict it’s possible Bitcoin will hit a new all-time high this year amid the rush to acquire.
The analysts said that while there is a cohort of “disbelievers” who are still sitting out on investing, another group of “curious investors” are expressing interest in learning more about Bitcoin and will allocate capital “in the coming days.”
Evidence of the rising demand from new investors can be found in Monday’s flow data for the spot Bitcoin ETFs, which shows that all the products combined accumulated 10 times more Bitcoin than miners were able to produce, according to data provided by Farsite.
A total of $493.4 million, or roughly 10,280 BTC, flowed into the various ETFs on Monday, while Bitcoin miners produced roughly 1,059 BTC worth $51 million, according to data from Blockchain.com. The newly mined supply is roughly 10% of the daily inflows and suggests that if demand remains strong, Bitcoin’s price could increase as the available supply dwindles.
Bitcoin proponent Anthony Pompliano said “Wall Street loves Bitcoin” during an interview on CNBC’s Squawk Box, highlighting that around 80% of the total supply has not moved in the past six months, and said that only around $200 billion in BTC is tradable, so these ETFs “have sucked up 5% of the entire tradable supply of Bitcoin in 30 days.”
Altcoins trade mixed
Despite the early pullback, the broader crypto market traded mixed, with the top 200 tokens evenly split between winners and losers.
Daily cryptocurrency market performance. Source: Coin360
Nervos Network (CKB) led the gainers with an increase of 61.4%, followed by a 21.4% gain for Neutron (NTRN) and an 18.9% increase for SuperVerse (SUPER). Ronin (RON) was the biggest loser, declining by 5.9%, while SATS (1000STATS) fell 5.6%, and Litecoin (LTC) lost 5.5%.
The overall cryptocurrency market cap now stands at $1.86 trillion, and Bitcoin’s dominance rate is 52.4%.
