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Why Bitcoin Just Traded as Low as $25,800

Bitcoin (BTC-USD) slumped unexpectedly on strong volume in the last week. BTC-USD did not trade at such volumes since Nov. 8, 2022, when it closed at $15,820.

Throughout 2023, Bitcoin attempted to break out above $30,000. An equilibrium of buyers and sellers prevented any bit of moves. That pattern changed when the S&P 500 (SPY) and Nasdaq (QQQ) continued their slump. The stock index is giving back more of its gains. Bitcoin and ethereum holders liquidated over $1 billion (data from Coinglass).

Persistently high interest rates decrease the appeal for crypto. One could sell the digital currency, hold fiat, and buy money market and treasury bonds that pay yields as high as 5.38%. The 1 month US treasury bill, for example, paid below 2.5% last Oct. 2022. It now yields 5.38% (as of Aug. 18, 2023).

Governments are developing a centralized digital currency. They will develop rules that offer more clarity on the sector. In addition, ETF firms like Blackrock and Coinbase (COIN), a crypto platform, are seeking favorable rules from the SEC. This decreases the uncertainty and increases the appeal for the sector.

Among the cryptocurrencies available, bitcoin is the most appealing. It has the biggest market capitalization and awareness among novice holders.