Bitcoin Drops 2% Amid U.S. Economic Data, Altcoins Tumble 3%

Bitcoin experienced a pause in its rally on Thursday, with traders taking profits after weeks of continuous gains that pushed the cryptocurrency close to record highs. The consolidation occurred amidst a series of U.S. economic data releases, including April retail sales that missed expectations, producer prices rising less than forecast, and jobless claims remaining steady. The NY Empire State Manufacturing Index and Philadelphia Fed Manufacturing Survey indicated softening business activity, but these signals had little impact on traditional markets, with the S&P 500 adding 0.4% and the Nasdaq finishing flat.

Bitcoin pulled back to $101,000 early in the U.S. session before rebounding above $103,000 later, showing a modest decline over the past 24 hours. Altcoins, however, fared worse, with the broad-market CoinDesk 20 Index declining by 3% during the same period. Native tokens of Aptos, Avalanche, and Uniswap tumbled by 6%-7%.

Analysts advised crypto investors not to be concerned about the recent pullback, viewing it as a correction within a broader medium-term uptrend. Ruslan Lienkha, chief of markets at YouHodler, attributed the upward momentum in equity markets to the China-U.S. tariff delay, with short-term traders locking in profits. This shift in sentiment affected riskier assets, including BTC. Kirill Kretov, trading automation expert at CoinPanel, noted that price movements below 5% could be considered market noise, likely resulting from profit-taking after the recent rally. With liquidity being thin, even modest sell-offs can quickly translate into noticeable corrections.

Vetle Lunde, senior analyst at K33 Research, observed that BTC had just exited one of its longest periods of below-neutral funding rates, indicating defensive positioning. This pattern resembled risk-averse behavior from October 2023 and 2024 and did not resemble price action near past local market peaks. Lunde was optimistic that the lack of froth with BTC above $100,000 paved the way for potential fresh record highs.

According to Steno Research, crypto tailwinds stem from a stealth expansion in private credit, especially in the U.S. and Europe. In past bull runs, crypto thrived on base money expansion fueled by massive injections of reserves by central banks. This time, however, the balance sheets of the Fed and European Central Bank have continued shrinking through quantitative tightening. Samuel Shiffman, in a Thursday report, highlighted that the real support for the rally comes from Western bank credit growth, a quieter and less visible engine behind this move. Forward-looking indicators project global financial conditions improving into the summer months, driven primarily by the U.S. dollar weakening, which has historically led to higher BTC prices.

Shiffman noted that there is likely room for the rally to continue through June and into early July before the picture begins to change. However, once the back half of July approaches, the setup gets trickier. Leading indicators suggest that the peak in financial easing might not last past August. This analysis indicates a potential for a continued crypto rally into the summer, supported by improving financial conditions and a weakening U.S. dollar.