Bitcoin Slides Ahead of US Inflation Data and Federal Reserve Decision
The world’s biggest cryptocurrency, Bitcoin, experienced a sharp decline of 3.78% on Tuesday, dropping to $66,817. This downward trend reflects trader anxiety as they await the release of US inflation data and the Federal Reserve’s monetary policy decision.
Bitcoin had reached a record high of $73,798 in March, fueled by inflows into dedicated US exchange-traded funds. However, the cryptocurrency has struggled to reach new highs since then. The upcoming inflation data and the Federal Reserve’s outlook on Wednesday could further exacerbate concerns that interest rates will remain elevated for an extended period, creating a challenging environment for speculative assets like cryptocurrency.
Rajagopal Menon, VP of WazirX, noted, “A recent batch of labor market figures exceeding expectations has cast doubt on the Federal Reserve’s likelihood of cutting interest rates anytime soon. This shift in sentiment has dampened risk appetite, adversely impacting cryptocurrencies.”
In addition to the US inflation and Fed outlook, a strong US employment report revealed that 272,000 jobs were added in May, surpassing the forecast of 185,000. This positive jobs report, along with higher-than-expected wage growth, led to a sell-off in stock market futures and a surge in Treasury yields, putting pressure on Bitcoin and causing it to fall sharply from a two-month high.
Balaji Srihari, Business Head of CoinSwitch, highlighted, “Additionally, there have been significant outflows from U.S.-listed spot bitcoin exchange-traded funds (ETFs), contributing to the downward pressure on the price. The regulatory uncertainty following the European Parliament elections has added pressure on Bitcoin’s price.”
Experts believe that while bearish sentiment may persist, the demand for cryptocurrencies remains robust in the near term. Menon stated, “Institutional interest in cryptocurrencies remains robust, as seen from consistent inflows into Bitcoin spot ETFs.”
Minal Thukral, Head of Growth & Strategy at CoinDCX, mentioned that traders and investors are adopting a more conservative and cautious approach, possibly booking short-term profits. Srihari of CoinSwitch expects continued volatility in the crypto market in the coming weeks due to significant developments in the global market.
As the cryptocurrency market continues to navigate through uncertainties and market fluctuations, traders and investors are advised to stay informed and exercise caution in their investment decisions.