Bitcoin's Downturn Continues Amidst Fed Tightening and Regulatory Worries

On Monday, Bitcoin's price declined further as pessimism in cryptocurrencies persisted due to prolonged high US interest rates. The Depository Trust & Clearing Corporation (DTCC) altered collateral regulations, creating additional challenges for crypto. Fears of higher interest rates and persistent inflation, as indicated by recent PCE price index data, weighed heavily on Bitcoin's value. Major altcoins, including Ethereum, XRP, and Solana, also saw losses, with the crypto market showing limited correlation to gains in technology stocks.

Bitcoin's Decline Continues Amidst Tightening Monetary Policy and Regulatory Headwinds

The cryptocurrency market remained under pressure on Monday as Bitcoin (BTC) extended its losses. The token has been facing persistent headwinds in recent weeks, primarily driven by a shift in Federal Reserve (Fed) policy and regulatory concerns.

DTCC's Collateral Changes Dent Crypto's Appeal

A significant blow to crypto came from the Depository Trust & Clearing Corporation (DTCC), a major financial services provider. DTCC announced that it will no longer accept Bitcoin and other cryptocurrencies as collateral for exchange-traded funds and other investment vehicles. This move, effective April 30th, significantly dampens the appeal of crypto, which has traditionally served as a primary vehicle for speculative activity.

Hawkish Fed Policy Weighs on Crypto

The DTCC decision further compounded Bitcoin's downward trajectory, which was already suffering from the weight of higher-for-longer U.S. interest rates. Cryptocurrencies have typically thrived in a low-rate, high-liquidity environment, which the Fed's monetary tightening efforts are reversing.

Hotter-than-expected inflation data, as measured by the Fed's preferred Personal Consumption Expenditures (PCE) price index, has further pressured crypto markets. Sticky inflation has left the Fed little room to ease rates, as evidenced by recent inflation readings.

Market Awaits Fed Meeting for Rate Cues

All eyes are now on the upcoming Fed meeting later this week, where the central bank is widely expected to keep rates unchanged. However, the market will be closely watching for any signals on the future path of interest rates. The Fed is currently anticipated to begin cutting rates by September or in the fourth quarter.

Altcoins Follow Bitcoin's Downward Trend

Major altcoins echoed Bitcoin's losses, mirroring the broader market sentiment. Ethereum (ETH), the world's second-largest cryptocurrency, dropped 3.4% to $3,202.01. XRP and Solana lost 3% and 4.5%, respectively.

Tech Stock Gains Offer Little Support

Despite strong earnings reports from tech titans Microsoft and Alphabet (Google's parent company), crypto prices found little support. The correlation between crypto and tech stocks has somewhat weakened in recent months, with cryptocurrencies showing limited upside from tech stock gains. Instead, the risk-off sentiment in the tech sector has amplified the downward pressure on crypto in recent sessions.

Conclusion

The cryptocurrency market remains under duress as sentiment towards cryptocurrencies remains negative. The DTCC's collateral changes, combined with the Fed's hawkish policy stance, are creating significant headwinds for the industry. The market will continue to monitor the Fed's actions closely for any indication of a shift in monetary policy, while the impact of the DTCC's decision on crypto adoption and speculation remains to be seen.