Bitcoin price continued to decline on Wednesday, dropping below key support levels as traders remained cautious ahead of a Federal Reserve meeting. Recent data showed ongoing outflows from Bitcoin investment products, particularly exchange-traded funds (ETFs), which added to negative sentiment in the market. The launch of new spot crypto ETFs in Hong Kong did little to boost investor confidence.
In the past 24 hours, Bitcoin fell sharply to as low as $56,500 by 06:34 ET (10:35 GMT). The decline in Bitcoin’s price coincided with a surge in the US dollar on Tuesday, with the greenback nearing a six-month high.
Kristian Haralampiev, Structured Products Lead at Nexo, explained that Bitcoin’s softer price was due to a “current risk-off sentiment” in the market. Factors contributing to this sentiment included slow volumes from Honk Kong ETFs, seasonal effects, regulatory challenges in the US, and an uncertain macroeconomic environment.
Traders favored the dollar over Bitcoin ahead of the Federal Reserve meeting, where Chair Jerome Powell was expected to maintain steady interest rates. Powell’s potential hawkish stance, following higher-than-expected inflation readings, led traders to adjust their expectations of early interest rate cuts by the Fed. The delay in rate cuts could negatively impact Bitcoin and the broader crypto industry, as they typically perform better in a low-rate, high-liquidity environment.
Capital outflows from crypto investment products in recent weeks reflected the market’s fatigue and dwindling interest in spot Bitcoin ETFs. Despite the current dip in Bitcoin’s price, Haralampiev viewed it as a buying opportunity, predicting that the digital coin could rebound to the low $60,000 range.
In line with Bitcoin’s losses, other cryptocurrencies also experienced declines, with Ethereum falling 5.1% to $3,009.19, and Binance Coin and Solana losing 2.6% and 7.8%, respectively. On the regulatory front, Binance founder Changpeng Zhao was sentenced to four months in prison for violating US anti-money laundering laws. Zhao’s sentencing followed FTX’s Sam Bankman-Fried receiving a 25-year prison term in 2023, highlighting the increasing scrutiny faced by prominent figures in the crypto industry.