June 5, 2023

Great Indian Mutiny

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Bitcoin and Ether drop as debt ceiling negotiations weigh on investors

Representations of the virtual currency Bitcoin are placed on US dollar banknotes in this illustration taken on May 26, 2020.

Dado Rovic | Reuters

Cryptocurrencies fell along with stocks on Wednesday as investors worried about the debt ceiling and the Federal Reserve’s next move.

Bitcoin fell more than 3% to $26,207.42, as measured by Coin. Ether lost about the same amount and was trading at $1,787.17.

This move coincided with a decline in US stocks. The Dow Jones fell about 300 points while the S&P 500 and Nasdaq Composite fell about 1% each.

On Wednesday, House Speaker Kevin McCarthy said debt ceiling talks were still hanging on to spending levels – with eight days until the US runs the risk of default. He also said he believed the negotiating teams could make progress on Wednesday.

“Markets opened very lower after falling significantly yesterday, so that could be a reaction to that,” said David Wells, CEO at Enclave Markets. “Although cryptocurrency is a global market, volumes are slightly higher during US trading hours, so sometimes large cryptocurrency moves follow large macro-driven stock moves.”

As investors watch the ongoing debt ceiling negotiations in Washington and investor expectations for a rate hike rise, bitcoin is beginning to behave as a risk asset again, just as it was beginning to trade synonymously with gold earlier this year.

Bitcoin and Ether are on track for their worst month of 2023, down 10% and 6%, respectively. Bitcoin is down nearly 8% for the quarter, after finishing the first quarter down 71%. Ether is down 2% after posting a 52% gain in the first quarter.

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