As the cryptocurrency market's value dropped from $2.34 trillion to $2.20 trillion, the crypto bulls began to lose control. Following massive million-dollar liquidations in the past few days, an additional $470 million was liquidated. The price of Bitcoin fell to $57,000 on Wednesday, down 9% in 24 hours and 13% in a week. The Crypto Fear and Greed Index also dropped from 67 (greed) to 54 (neutral) in a day. Investors predict that the BTC price will drop further to $47,000. How did this happen?
Bitcoin and crypto prices declined amid increasing fears that US interest rates could remain high for longer ahead of the Fed's May 1 monetary policy decision. Investors received hawkish signals that the Fed may not change interest rates from 5.25-5.50%. Chairman Jerome Powell had previously hinted at three interest rate cuts. However, there could be fewer interest rate cuts this year. The latest PCE data indicated persistent inflationary pressures. The GDP growth of 1.6% in the first quarter showed stagflation. The prediction market is forecasting only one Fed interest rate cut this year, which is largely negative for cryptocurrency prices.
The US Dollar Index Hits Six-Month High.
Additionally, the US dollar index (DXY) climbed to 106.45, reaching its highest level in six months. The US 10-year Treasury yield (US10Y) also rose to 4.688%. The increase in these figures indicates inflationary pressure affecting the price of Bitcoin. Investors are awaiting the Treasury's repayment announcement for the second quarter of 2024, which could bring some recovery in Bitcoin.
Bitcoin ETFs Are Experiencing Outflows.
The US spot BTC ETF failed to provide support to the market on Tuesday, with a $161 million outflow following a major correction on Wall Street. However, ETFs experienced five consecutive days of outflows. In Hong Kong, the six spot Bitcoin and Ethereum ETFs recorded a trading volume of only $12 million on the first day. This is 383 times lower than the first issuance of US Bitcoin ETFs. Institutional investors seem to have lost hope in Bitcoin ETFs and are likely to avoid investing unless there is a positive development in the market.
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