The price of Bitcoin rose slightly on Wednesday, benefiting from a weaker dollar and anticipation of a key U.S. consumer inflation report. The world’s largest cryptocurrency saw a 1% increase over the past 24 hours, reaching $62,489.1 by 07:58 ET (11:58 GMT).
Bitcoin received a boost as the dollar declined following comments from Federal Reserve Chair Jerome Powell suggesting that interest rates would not rise further. However, Powell expressed concerns about inflation not reaching the central bank’s 2% target.
The recent producer price index (PPI) data for April came in higher than expected, setting the stage for a potentially strong consumer price index reading later in the day. Despite these positive movements, dwindling capital flows into Bitcoin and crypto investment products, as well as the threat of increased regulatory action, limited optimism in the crypto markets.
In Hong Kong, three spot Bitcoin and exchange-traded funds experienced significant outflows of nearly $40 million on Monday, erasing two weeks of inflows since their debut in April. These outflows coincided with negative sentiment towards Hong Kong and Chinese markets due to increased U.S. trade tariffs on Beijing and mixed economic signals from China.
While initial excitement over the approval of spot Bitcoin ETFs in the U.S. drove Bitcoin to record highs in early March, the cryptocurrency has since traded within a range of $60,000 to $70,000 for the past two months. The lack of positive cues has kept the market subdued.
Altcoins, such as Ethereum, and experienced losses ahead of the U.S. CPI data, reflecting a more risk-averse trading environment. The potential for sticky U.S. inflation to keep interest rates high could negatively impact crypto markets, which typically perform better in low-rate, high-liquidity environments.
Bitcoin miners may face increased selling pressure as transaction fees decline, affecting their revenue streams. The recent reduction in fees could lead to miners selling off their inventory, adding to downside risks faced by the cryptocurrency. Last month’s halving reduced the per-block coin emission, putting pressure on transaction fees and Bitcoin’s price to compensate for the impact on miner profitability.