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Bitcoin is down ahead of the Federal Reserve’s meeting tomorrow—but it’s likely the result of factors beyond the expectation that the central bank will not tinker with interest rates.
The price of Bitcoin is now trading for $64,696, according to CoinGecko—a 4% 24-hour drop.
Just five days ago, the biggest coin had hit a new all-time high of $73,737. It even flipped silver’s market cap.
Tomorrow, the Federal Reserve will reveal whether it will be cutting interest rates, which have been at a 23-year high for some time. It is expected that the central bank will keep them where they are.
The Fed started raising rates in 2022 in a bid to mitigate 40-year high inflation rates. “Risk-on” assets like stocks and crypto were negatively affected as investors retreated to the dollar.
But Bitcoin, other cryptocurrencies, and certain stocks have done well this year and last as investors eye up the tech world.
Can Bitcoin’s recent dip be blamed on a potentially delayed Fed action? Partly, CoinShares head of research James Butterfill told Decrypt.
Last week, data dropped showing that in February, inflation was higher than expected. Some investors may expect the Fed to announce it will push rate cuts further down the road.
But this isn’t the only reason.
“The recent decline in prices can be attributed to a combination of factors,” Butterfill said, adding that the sudden drop on Tuesday on exchange BitMEX’s Bitcoin prices “likely contributed to the market’s instability.”
Flows into newly approved exchange-traded funds (ETFs) have also been negative overall as clients of one of the biggest crypto funds—Grayscale—cash out.
Yesterday, the fund experienced its biggest single-day outflows. When investors bailed following the fund’s conversion to an ETF in January, the price of Bitcoin tanked. The same seems to be happening now.
Butterfill also added that Bitcoin’s rapid surge meant that the asset was “technically overbought.” An “overbought” asset refers to when its price is higher than it’s actually worth—and means a correction is due.
Between inflation and the upcoming halving, the road looks rocky for the near future.
Edited by Ryan Ozawa.