Market Wrap: Is Bitcoin Breaking Down or Breaking Free?

Bitcoin (BTC) was sliding back toward the crucial pivot point of $30,000 after a brief rally earlier this week to about $31,700.

The largest cryptocurrency was recently changing hands around $30,100, down 3.1% on the day.

Ether (ETH), the second-largest cryptocurrency by market value, was down 1.4% to $1,788.

Analysts in both crypto and traditional markets were looking ahead at the likely outcome of the European Central Bank's monetary-policy meeting on Thursday. It's possible central banks beyond the U.S. Federal Reserve might start to hold sway over markets. As central banks outside the region start to raise interest rates, theoretically making their fixed-income assets more attractive to yield-seeking investors, they make their currencies more attractive.

That could have implications for bitcoin because its price is usually denominated in dollars, and the trend often coincides with moves in the greenback versus major regional currencies.

"We're starting to price in much more aggressive tightening by the ECB," Edward Moya, senior market analyst at the foreign-exchange broker Oanda, said during an appearance on CoinDesk TV's "First Mover" show. "This is going to counter a tremendous amount of dollar strength. The consensus trade is going to be for the dollar to weaken in the second half of the year, not because of what's happening with actions by the Fed, but mainly because of central banks around the world."

Among altcoins, Chainlink's LINK token has gained 25% over the past five days as the provider of "oracle networks" for blockchains on June 7 announced a new roadmap for implementing staking rewards. As of Wednesday, however, the rally appeared to have topped out.

For the latest on blockchain developers' efforts to scale up the Ethereum network with faster and cheaper transactions, check out this piece by CoinDesk's Sam Kessler and Sage D. Young on Danksharding.

In traditional markets, stocks slid as crude oil prices rose above $120 a barrel.

For months, bitcoin traded seemingly in lockstep with U.S. stocks – especially technology shares – as more institutional investors nosed into cryptocurrencies. Recently, though, the link appears to have weakened.

Genesis Trading (which is owned by CoinDesk parent company Digital Currency Group) offers some clues on the declining correlation in a monthly report out this week.

Bitcoin's 60-day correlation with the Standard & Poor's 500 Index has declined over the past month, according to the Genesis Trading report. The analysts posited there may not be a "greater distinction of narratives" between the asset classes.

"The market is still dealing with the crypto-specific fallout from the implosion of the Terra ecosystem," they wrote. "Strong tailwinds such as new fund raises, progress on the Ethereum Merge, deeper institutional acceptance and continued application growth could shift sentiment in the other direction, highlighting crypto's relative youth, growth potential and technology angle."

Whether this is good or bad for bitcoin is an open question. But crypto traders have reason to be optimistic, according to the report, if bitcoin can break free while "traditional markets grapple with worsening economic conditions and a still-uncertain [interest] rates outlook."

Most digital assets in the CoinDesk 20 ended the day lower.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.