Market Wrap: Cryptos Decline After Rejection of EU Bitcoin Proposal

Bitcoin (BTC) traded roughly flat over the past 24 hours, although some analysts expect an increase in volatility over the next few days.

On Monday, a proposal that could have required cryptocurrencies like bitcoin to shift to more environmentally friendly mechanisms was rejected in a European Union (EU) parliament committee vote. The proposal was added to a draft of the Markets in Crypto Assets (MiCA) framework last week, which was met with a heavy backlash from crypto advocates worldwide.

There was little market reaction following the EU rejection, although some alternative cryptocurrencies (altcoins) such as dogecoin (DOGE) pared earlier gains. Meanwhile, bitcoin experienced less selling pressure than altcoins on Monday, suggesting lower appetite for risk among crypto traders.

In traditional markets, the S&P 500 extended losses on Monday while gold and oil prices tumbled. Some traders expect the U.S. Federal Reserve to acknowledge soaring energy prices, which could lead to slower economic growth, during the conclusion of their two-day policy meeting on March 15-16.

Bitcoin’s trading volume across major exchanges declined to its lowest level since Feb. 19 over the past weekend. That could indicate some caution among traders ahead of the Fed meeting this week.

Geopolitical uncertainty also contributed to the recent slowdown in trading activity, which is reflected in blockchain data. So far this year demand among bitcoin holders has flattened, reflecting the “impact of global macro uncertainty on investor sentiment, with weaker BTC accumulation taking place as a result,” Glassnode, a crypto data firm, wrote in a blog post.

Further, the narrow trading range between $35,000 and $40,000 could result in higher volatility over the next two weeks, according to some technical indicators.

The put/call ratio continued to decline over the past few days, indicating less bearish sentiment among bitcoin options traders. The ratio is currently at the lowest level in a month, albeit still above the Jan. 19 trough.

“Despite the looming interest rate increase expected from the Fed this week, the BTC put/call ratio continues to decline from an early February high,” Fundstrat Global Advisors wrote in a Monday email. “This decline in the overall ratio might indicate that investors are starting to position for longer-term risk.”

Digital assets in the CoinDesk 20 ended the day lower.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.