Bitcoin’s Value Drops as Federal Reserve Rate-Cut Speculation Decreases and Interest in ETFs Cools

Bitcoin’s Value Drops as Federal Reserve Rate-Cut Speculation Decreases and Interest in ETFs Cools

(Bloomberg) — Bitcoin sank amid slowing demand for dedicated U.S. exchange-traded funds and declining bets on looser monetary policy from the Federal Reserve.

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The digital asset fell as much as 5.3% before paring some of the decline to change hands at $66,849 as of 11:41 a.m. Tuesday in Singapore. Tokens previously favored by the meme crowd such as Pepe and dogwifhat also crashed, subjecting a gauge of smaller digital assets to its biggest two-day decline in about two weeks.

This year’s strong crypto rally is losing steam as continued U.S. price pressures lead investors to limit bets on Fed interest rate cuts, boosting Treasury yields and the dollar . This is a more challenging backdrop for speculative segments of global markets such as the digital assets sector.

The change in sentiment on the Fed impacts “all of crypto, where there was a sell-off at the start of the week – no sector is spared, especially those where prices have outperformed Bitcoin over the last six months, for example memes,” Stefan said. von Haenisch, head of trading at OSL SG Pte.

Bitcoin has lost about 10% since hitting a high of $73,798 in mid-March. The flood of daily inflows into US spot-Bitcoin ETFs has started to ease, weighing on the largest digital asset. Early reports raised the possibility of a net capital outflow on Monday, according to data compiled by Bloomberg.

The crypto market looked “weak” over the past 12 hours following the latest US economic data, said Richard Galvin, co-founder of DACM.

The figures showed that the US manufacturing industry saw unexpected growth for the first time since September 2022 and input costs soared. Following the report’s release, the amount of Fed easing embedded in swap contracts for this year slipped to about 65 basis points, less than policymakers expected.

The supply of new Bitcoin tokens is expected to halve this month, a quadrennial event that some traders view as a sideshow for the cryptocurrency. Others say it will be difficult to achieve further gains given that the token has quadrupled since the start of 2023.

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