The world’s largest cryptocurrency was 1.7% lower at $122,784.0
Bitcoin pulled back on Wednesday after the digital token hit record levels above $126,000 earlier this week, as profit-taking intensified and strength in the U.S. dollar challenged so-called “debasement-trade” flows.
By 12:26 GMT, the world’s largest cryptocurrency was trading 1.7% lower at $122,784.0.
The token had surged to an all-time high on Monday, underpinned by heavy inflows into Bitcoin exchange-traded funds (ETFs) and speculative positioning betting on fiat currency weakness during a protracted U.S. government shutdown.
Reports also cited “debasement trades” – bets that the fiat currency would weaken amid rising fiscal uncertainty – as a key driver behind Bitcoin’s push higher.
However, worries remain that the ongoing U.S. government shutdown, which is now entering its second week and led to the delay of economic data releases, could complicate the outlook for potential central bank rate cuts over the rest of the year. Against this backdrop, investors were seeking out safety, eating away at some of the appeal of Bitcoin, which is broadly considered to be a riskier asset.
We can attribute the recent retracement to profit-taking and liquidations from high funding rates. Looking forward, it is important to assess the severity and duration of the looming U.S. government shutdown and how it may affect loans, employment numbers, and more, said Stan Low, operations and research at Grvt, a peer-to-peer financial platform.
The U.S. dollar index, which tracks the country’s currency against a range of other major currencies, has firmed.
Markets are now focusing on the upcoming publication later today of minutes from the central bank’s latest policy meeting in September, as well as comments from various bank officials this week.
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