World’s biggest cryptocurrency Bitcoin slid as much as 3.78 per cent to $66,817 on Tuesday reflecting trader anxiety ahead of the US inflation data release and the Federal Reserve’s monetary policy decision.
Bitcoin reached a record high of $73,798 in March, boosted by inflows into dedicated US exchange-traded funds. However, it has struggled to achieve new highs since then. The upcoming inflation data and the Federal Reserve’s outlook on Wednesday could reinforce concerns that interest rates will remain elevated for an extended period, creating a challenging environment for speculative assets like cryptocurrency.
Also read: Ether gets ETF approval from US regulator; experts predict volatility ahead
“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. Bitcoin’s attempt to climb above $72K faltered, pulling back below $70K, without accelerating despite breaking downward resistance. Meanwhile, selling pressure remains subdued, indicating a market inclined towards buying,” said Rajagopal Menon, VP, WazirX.
Other than US inflation and Fed outlook, strong US employment report revealed that 272,000 jobs were added in May, significantly surpassing the forecast of 185,000. This strong jobs report, coupled with higher-than-expected wage growth, led to a sell-off in stock market futures and a surge in Treasury yields. The prospect of sustained higher interest rates pressured Bitcoin, causing it to fall sharply from a two-month high.
“Additionally, there have been significant outflows from U.S.-listed spot bitcoin exchange-traded funds (ETFs). The ETFs experienced a cumulative outflow of over $64 million, contributing to the downward pressure on the price. The regulatory uncertainty following the European Parliament elections has added pressure on Bitcoin’s price. The election results will influence the implementation of the MiCA (Markets in Crypto Assets) regulations and shape EU policy towards crypto,” said Balaji Srihari, Business Head, CoinSwitch.
Also read: SEC widens accessibility of crypto investing with approval of ETFs for ether
Where’s bitcoin prices headed?
Experts believe that bearish sentiment, crypto demand to remain robust in the near term.
“The market’s bearish sentiment stems from uncertainties about upcoming events and their potential economic impact. Despite the downturn, institutional interest in cryptocurrencies remains robust, as seen from consistent inflows into Bitcoin spot ETFs, with 19 consecutive days of net inflows till June 10th,” Menon added.
Also read: SEBI recommends regulators to oversee crypto trade, RBI still sees ‘macro risk’
According to Minal Thukral, Head, Growth & Strategy, CoinDCX, traders and investors are following a more conservative and cautious approach for the time being and perhaps booking short term profits.
On the other hand, Srihari of CoinSwitch expects continued volatility in the crypto market over the coming weeks, given significant developments in the global market.
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Published: 11 Jun 2024, 09:32 PM IST