Investing.com — Bitcoin prices fell further on Wednesday, briefly falling below a key support level as traders continued to shy away from speculative assets such as cryptocurrencies on expectations for the Federal Reserve meeting.
Recent data showing continued outflows from Bitcoin investment products, particularly exchange-traded funds (ETFs), also weighed on sentiment, while the launch of a new spot crypto ETF in Hong Kong also weighed on sentiment. There were few bright spots.
It has fallen sharply over the past 24 hours, dropping to $56,500 by 6:34 pm ET (10:35 p.m. Japan time).
Traders expected to prefer dollar over bitcoin due to Fed expectations
Bitcoin's decline coincided with a sharp rally on Tuesday, with the dollar nearing a six-month high.
Christian Haralampiev, Head of Structured Products at Nexo, told Investing.com that Bitcoin prices are softening amid “the current blanket risk-off declaration.”
He said the trading regime was “driven by slowing Hong Kong ETF volumes, typical market seasonal effects, and further regulatory headwinds in the US, all amid an uncertain macroeconomic environment.” Ta.
Traders were largely biased toward the dollar until Wednesday's policy decision, when the central bank was widely expected to keep interest rates on hold.
But Chairman Jerome Powell is likely to strike a chord with hawks, especially after some better-than-expected inflation numbers.
Anticipating this scenario, traders were steadily pricing in expectations for an early rate cut by the Fed. The central bank is currently expected to start cutting interest rates only by September, if at all.
Given that Bitcoin typically thrives in an environment of low interest rates and high liquidity, a prolonged period of US interest rates bodes badly for Bitcoin and the broader crypto industry.
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This idea has also been a key driver of capital outflows from crypto investment products in recent weeks, as the hype for spot Bitcoin ETFs dwindles as long-term interest rates rise.
“The market is feeling tired and lacking stimulants, so it may be ready to test another low in the $50,000 range,” Harampyev added.
However, the crypto expert sees the drop as a buying opportunity, as he expects the world's largest digital coin to “recover to the low $60,000 range.”
Crypto prices today: Altcoins track Bitcoin losses
Amid the continued slump, prices of a wide range of cryptocurrencies also fell. The world's second-largest cryptocurrency fell 5.1% to $3,009.19, while and were down 2.6% and 7.8%, respectively.
On the regulatory front, disgraced Binance founder Qiao Changpeng pleaded guilty to violating US anti-money laundering laws and was sentenced to four months in prison.
Zhao was once considered the most powerful person in the crypto industry and became the second major crypto CEO to be sentenced to prison after FTX's Sam Bankman Fried in 2023. However, Zhao's sentence was significantly lighter than the 25-year prison sentence received by Bankman Fried.
