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Bitcoin slipped to its lowest level in more than two months in early May, weakening slightly in afternoon trading after the Federal Reserve’s decision to keep interest rates steady.
The cryptocurrency fell 7% to $56,526.00, its lowest level since February 27, according to CoinMetrics. It was last down about 3% at $57,622.59.
Investors focused on the latest interest rate decision from the Federal Reserve, which concluded its two-day policy meeting Wednesday afternoon. The central bank kept its short-term borrowing rate unchanged, as expected. The federal funds rate has been in a target range between 5.25% and 5% since July 2023.
“Rising real interest rates have likely supported the dollar and weighed on bitcoin over the past month,” said Zach Pandl, head of research at Grayscale Investments. “The FOMC statement expressed concerns about inflation, but did not rule out rate cuts. The expectation of future rate cuts would support Bitcoin prices and crypto markets, more broadly.”
Bitcoin is trading in a tight range, with the cryptocurrency’s main catalysts – US exchange-traded funds and the halving – behind it. Its decline from March’s all-time highs intensified this week amid broader risk aversion. Bitcoin is down around 10% for the week and recorded its worst month since November 2022 on Tuesday.
Bitcoin (BTC) slips below $57,000 for the first time since February
“The broader macroeconomic backdrop has deteriorated for assets like crypto that thrive on liquidity,” Geoff Kendrick, head of digital assets research at Standard Chartered, said in a note on Wednesday. “Broader liquidity measures in the United States … have deteriorated rapidly since mid-April.”
Kendrick also highlighted five straight days of outflows from US Bitcoin ETFs and a “bad” reaction to the launch of spot Bitcoin ETFs in Hong Kong this week. Bitcoin’s decline also comes a day after former Binance CEO Changpeng Zhao was sentenced to four months in prison for money laundering.
Bitcoin investors expect the cryptocurrency to see a strong rally later this year, but say its price could continue to fall in the coming weeks due to macro and geopolitical pressures.
“We could see a consolidation in bitcoin prices over one to two months, trading in a range of $10,000 on either side,” Bitfinex analysts said. “We expect the positive impact of the halving, which resulted in a reduction in the supply of bitcoin, to be felt in the coming months.”
—CNBC’s Michael Bloom and Jeff Cox contributed reporting.
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