Bitcoin Falls Below $27.5K as Investors Weigh Meme Mania, Binance Congestion Issues

Ether’s deflationary narrative continues despite Monday’s price drop. Major crypto assets traded down on Monday.

AccessTimeIconMay 8, 2023 at 8:03 p.m. UTC
Updated May 9, 2023 at 1:13 p.m. UTC
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Bitcoin (BTC) kicked off the U.S. trading week, falling below $27,500 in the afternoon (ET).

The largest cryptocurrency by market capitalization was recently trading at around $27,350, down over 5.5% in the past 24 hours, according to CoinDesk data, as investors continued to mull over a surge in interest in the PEPE meme coin and Binance congestion issues that forced the exchange giant to temporarily suspend bitcoin withdrawals over the weekend.

Binance resumed the service Sunday night (ET), but the stoppages and rising price of bitcoin raised questions about the impact of large bitcoin transaction volume.

Ether (ETH) followed a similar pattern, falling beneath the $1,900 level it’s held for much of the past seven days. The second largest crypto in market value was trading at around $1,829, off 4.4% on a 24-hour basis.

ETH’s deflationary narrative post-Ethereum Shapella upgrade has strengthened as ETH’s net issuance, or the annualized inflation rate, recently dropped to -2.7%, according to ultrasound.money. More than 62,300 ETH, worth around $116 million, have been burned over the past seven days, ultrasound.money’s data tracker showed.

“Both BTC and ETH haven't tested near-term supports since the rally we saw around mid-March," Joe DiPasquale, CEO of crypto fund manager BitBull Capital, told CoinDesk in an email.

DiPasquale said BTC might test support between $25,000 and $27,000 before bouncing again, although the economic outlook is favorable for BTC and the broader crypto market to thrive. He called accumulating BTC and ETH on dips a “sound strategy.”

Most major tokens were also trading in the red on Monday, including crypto payment-focused XRP and Polygon’s MATIC, which both tanked over 8% to trade at around 42 cents and 92 cents, respectively. The PEPE craze appeared to be waning with its market cap dropping to some $878 million after peaking above $1 billion before the weekend, Messari data showed.

The CoinDesk Market Index (CMI), which measures the overall crypto market performance, was down over 5% for the day.

Greg Cipolaro, global head of research at bitcoin investment firm NYDIG, wrote in a Friday newsletter that despite short-term price fluctuation, BTC is increasingly serving as a “buy-and-hold asset” based on on-chain data.

“With more bitcoins being held for longer, a dwindling supply is available for short-term trading,” Cipolaro wrote, adding that this may result in increased volatility or trading costs through wider spreads.

“Given bitcoin’s fixed supply nature, this also means that fewer bitcoins are available for others to purchase. This may result in upward pressure on prices if the demand for bitcoin grows,” he wrote.

Equity markets turned mixed on Monday midday, with the S&P 500 and tech-heavy Nasdaq Composite trading almost flat, while the Dow Jones Industrial Average (DJIA) was down 0.1%.

In bond markets, the note on the 2-year Treasury yield – a gauge of near-term, interest rate expectations – edged 8 basis points higher to sit around 3.99%. The note on the 10-year Treasury yield also rose 7 basis points to 3.51%.

Edited by James Rubin.

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Jocelyn Yang

Jocelyn Yang is a markets reporter at CoinDesk. She is a recent graduate of Emerson College's journalism program.


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