Bitcoin, the world's largest cryptocurrency, fell by 3.78% to $66,817 on Tuesday. This drop reflects trader concerns ahead of the release of US inflation data and the Federal Reserve's monetary policy decision. Bitcoin had previously reached an all-time high of $73,798 in March, driven by inflows into dedicated US exchange-traded funds (ETFs). However, it has since struggled to hit new highs. The anticipated inflation data and the Federal Reserve's outlook on Wednesday could heighten fears that interest rates will remain high for an extended period, creating a challenging environment for speculative assets like cryptocurrency.
“A recent series 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, despite breaking downward resistance. Meanwhile, selling pressure remains subdued, indicating a market inclined towards buying," said Rajagopal Menon, VP at WazirX.
In addition to US inflation and the Federal Reserve's outlook, a strong US employment report revealed that 272,000 jobs were added in May, significantly surpassing the forecast of 185,000. This robust jobs report, along 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 drop sharply from a two-month high.
“Furthermore, there have been significant outflows from U.S.-listed spot Bitcoin ETFs, which experienced a cumulative outflow of over $64 million, contributing to the downward pressure on the price. Regulatory uncertainty following the European Parliament elections has also 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 at CoinSwitch.
Where Are Bitcoin Prices Headed?
Experts believe that while bearish sentiment may persist, demand for crypto is expected to remain strong 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 until June 10th," added Menon.
Minal Thukral, Head of Growth & Strategy at CoinDCX, noted that traders and investors are currently adopting a more conservative and cautious approach, potentially 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.
