[Bitcoin Now] Tightening Fears and Binance Setbacks Break $17,000... Investor Sentiment 'Cooling'

[Image source=Reuters·Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] As fears of tightening persist, the price of Bitcoin, the leading cryptocurrency, which briefly surpassed the $18,000 level this week (December 12?18), has fallen back to the $16,000 range. The announcement by global accounting firm Mazars to halt dealings with major cryptocurrency exchanges such as Binance further fueled the price decline.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 12:37 PM on the 18th, Bitcoin was priced at $16,744 (approximately 21.93 million KRW), up 0.38% from the previous day.

Bitcoin prices began to rise from the 13th (local time) after the U.S. November Consumer Price Index (CPI) increase slowed more than expected. The U.S. November CPI rose 7.1% year-over-year, below the forecast of 7.3%. This was the smallest increase since December of last year. Bitcoin prices surged to $18,276, reaching levels seen before the global exchange FTX crisis fully unfolded.

However, fears over the U.S. Federal Reserve’s (Fed) tightening policy persisted, leading to a downward trend. On the 14th, the Fed implemented a big step rate hike (a 0.50 percentage point increase in the benchmark interest rate), which was smaller than previous hikes. Although the pace of tightening slowed, the Fed indicated that additional measures would be necessary to curb inflation. Fed Chair Jerome Powell stated that rate cuts would not be considered until there is clear evidence that inflation is definitively declining, adding, "There is still a long way to go." Major central banks such as the European Central Bank (ECB) and the Bank of England (BOE) also continued their tightening moves by raising benchmark interest rates by 0.50 percentage points.

Additionally, Mazars’ announcement to halt dealings with exchanges like Binance and Crypto.com was a negative factor. Mazars stated that it had "ceased activities related to preparing proof of reserve reports for the cryptocurrency sector," citing "concerns about how the proof of reserve reports are understood by the public." These reports show the status of customer funds held by exchanges, and following the FTX crisis, exchanges sought to demonstrate transparency. However, suspicions had been raised that these reports, which were meant to prove exchange transparency, were not formal audits but prepared at the request of the exchanges.

As fears of tightening and concerns about Binance persisted among investors, Bitcoin prices briefly dropped to the $16,600 range the previous day. Investor sentiment also cooled. According to cryptocurrency data provider Alternative, the Fear & Greed Index, which measures investor sentiment, fell by 2 points to 26 (fear) compared to the previous day. Although it had risen to 31 (fear) on the 15th, it then followed a downward trend. Alternative’s Fear & Greed Index ranges from 0, indicating extreme fear and pessimism about investing, to 100, indicating optimism.