Bitcoin falls as bets on Fed rate cut dwindle, ETF demand cools

(Bloomberg) — Bitcoin fell as demand for U.S.-specific exchange-traded funds cooled and bets on easy monetary policy from the Federal Reserve diminished.

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The digital asset was down 5.3% as of 7:15 a.m. Tuesday in London, before recouping some of its losses to change hands at $66,920. Tokens that were early favorites among the meme crowd, such as Pepe and Dogwifhat, also plummeted, causing smaller tokens to fall. Digital assets posted their biggest two-day losses in about two weeks.

Cryptocurrencies’ sharp rally this year is losing steam as persistent price pressure in the United States leads investors to limit bets on a rate cut by the Federal Reserve, boosting Treasury yields and the dollar. This is a more difficult backdrop for speculative areas of global markets such as the digital asset industry.

Stefan said the change in sentiment toward the Fed is having “an impact across the entire cryptocurrency space, and as the week started, there was a sell-off in the cryptocurrency space — no area was unaffected, especially those whose prices have been high in the past. Areas that outperformed Bitcoin over six months, such as memes.” von Haenisch, head of trading at OSL SG Pte.

Bitcoin has fallen about 10% since peaking at $73,798 in mid-March. Heavy daily inflows into U.S. spot Bitcoin ETFs have eased, putting pressure on the largest digital asset. On Monday, investors bought a net $86 million from the funds. A total of 10 products have attracted about $12 billion in funding since going online on Jan. 11, according to data compiled by Bloomberg.

DACM co-founder Richard Galvin said that the cryptocurrency market has appeared “soft” in the past 12 hours following the release of the latest US economic data.

Data show that the U.S. manufacturing industry expanded unexpectedly for the first time since September 2022, and input costs are facing challenges. After the release of the report, the Fed’s easing margin for swap contract pricing this year fell to about 65 basis points, lower than policymakers expected.

The supply of new Bitcoin tokens is set to be halved this month, an event that occurs every four years, and some traders see this as support for the cryptocurrency. Others believe that further gains will be hard to come by given that the coin has quadrupled since the start of 2023.

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