Why is Bitcoin price down today?

Bitcoin price is down today as investors fear that the S&P 500 might have topped and regulatory uncertainty continues to weigh down crypto assets.

Bitcoin experienced a significant 4.5% drop on May 23, retesting its $66,750 support. The movement caused a $1.3 billion decline in Bitcoin’s futures open interest, even though a mere $40 million in leveraged longs were liquidated in the previous 12 hours, according to Coinglass data.

Stocks react to real estate woes and mixed macroeconomic data

The decline in Bitcoin’s price coincided with a 1.5% correction in the S&P 500 futures after it hit an all-time high of 5,368 points earlier in the day.

Similarly, WTI oil prices faced a 2.3% drop in 4 hours on May 23, retesting the $76.30 level, the lowest in almost three months. Still, other events, including the looming approval of Ether's spot exchange-traded fund (ETF) in the United States and macroeconomic data, likely also played crucial roles in Bitcoin's sudden correction.

The U.S. real estate market's downturn alarmed investors after a 7.7% yearly decline in April new home sales, signaling a surplus that could take over nine months to clear. The housing market has profound implications for the financial sector, as regional banks face increased risk of loan defaults. This shakes investor confidence in banking stocks, negatively influencing broader market sentiment.

Additionally, the U.S. S&P composite PMI rose to a 25-month high in May at 54.4, up from 51.3 in April. While signaling economic growth, it ironically poses a challenge for risk-on investors by reducing the likelihood of monetary easing, a process where the U.S. Federal Reserve lowers interest rates to stimulate the economy. In essence, higher rates typically make fixed-income investments more attractive, which is detrimental to Bitcoin.

Melissa Brown, managing director at SimCorp, reportedly told CNBC that investors are on the edge given the uncertainty caused by elections in the U.S. and United Kingdom, mixed macroeconomic data and ongoing wars. According to Brown, traders tend to prefer sitting out than to “commit more money to the market” given the current circumstances.

Regulatory uncertainty in crypto and Nvidia earnings

Recent legislative developments add another layer of complexity. The FIT21 Act passing the U.S. Lower House on May 22, despite being seen as a sectoral victory, introduces a gray area concerning the SEC’s power over cryptocurrencies that fail to meet the "sufficient decentralization" criterion. This potential regulatory oversight could dissuade investors wary of increased governmental intervention.

The bill still requires voting in the Senate, which will likely assign a committee for possible rounds of reviews and hearings. Consequently, parts of the FI21 Act could change, with House and Senate members meeting to iron out any differences, which will demand Congress to vote on the matter one more time. Moreover, there is no time constraint on when senators must act on it. In short, even if the proposal remains largely pro-crypto, it will unlikely be effectively implemented over the next few months.

Contrary to broader tech market trends, Nvidia (NVDA) stock jumped 10% following a report of better-than-expected earnings growth of 21% for the quarter. Nvidia CEO Jensen Huang pushed back against concerns the company could face reduced demand from consumers as it shifts between its current and next generation of AI chips. While tech stocks in general did not rally, Nvidia’s surge illustrates how individual company performances can still sway market appetite for risk-on assets, including Bitcoin.

As Bitcoin's recent price movement aligns closely with shifts in the S&P 500 futures, it is evident that the cryptocurrency is increasingly moving in sync with broader financial markets. However, regulatory uncertainties continue to cast a long shadow over the crypto market, such as the ongoing legal challenges facing major industry players such as Coinbase, Binance, and Consensys, along with scrutiny of privacy-focused wallets and services. #Write2Earn