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Why is Bitcoin down today? – Forbes Advisor
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Bitcoin (BTC) continues its downward trend today as crypto investors digest the results of the latest Federal Open Market Committee, or FOMC, meeting. After the Fed held interest rates steady at the June meeting, many lost hope of significant rate cuts before the end of the year, sending the crypto plummeting.
Although bitcoin is still up more than 45% year to date, the world’s oldest cryptocurrency is down more than 5% in the last 24 hours. This means that bitcoin, which hit an all-time high above $73,000 in March, has returned to $61,000.
Ethereum (ETH), the world’s leading altcoin, also fell by more than 5% in the last 24 hours, bringing the price of ETH down to around $3,300. The fall in the price of Bitcoin has affected almost the entire cryptosphere.
Other top altcoins are also falling. Solana (SOL) and BNB Coin (BNB) are each down 3%. Cardano (ADA) is down over 2%, while XRP (XRP) is down 1%.
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Why is Bitcoin down today?
Bitcoin began its latest descent after the June FOMC meeting. The Fed maintained the federal funds rate stable, erasing any hopes of a first-half rate cut and spooking some crypto investors.
Falling interest rates tend to allow liquidity to flow into more speculative assets such as cryptocurrencies, thereby increasing the value of these assets.
Bitcoin’s price decline today is a continuation of this trend that began after the June FOMC meeting. Over the past two weeks, outflows from exchange-traded funds or crypto ETFs reached $1.2 billion. Bitcoin is down more than 6% over the past week.
As the crypto industry mulls over the Fed’s latest interest rate decision, it is also eagerly awaiting another key indicator. The May personal consumption expenditure, or PCE, the price index is expected this Friday. This is the Fed’s preferred inflation indicator and can therefore have a significant impact on markets.
The crypto market is typically nervous ahead of the PCE release, and investors will be looking for a positive sign that inflation is under control and a rate cut could take place at the next FOMC meeting.
While this recent decline in bitcoin is unlikely to have a major effect on the cryptocurrency’s overall price trajectory, any negative news from the PCE report could hamper bitcoin’s recent strong performance in the near term.
Bitcoin has been in a bull market since November
Bitcoin has been on a strong rise since November last year. It rose from $34,000 at the end of October to over $73,000 in March.
After the United States Security and Exchange Commission approved 11 new bitcoin spot exchange traded funds on January 10, bitcoin has been on an upward trend, gaining more than 50% this year alone.
ETFs, like mutual funds, are baskets of securities that investors can trade as a single investment. However, unlike mutual funds, ETFs are traded directly on an exchange throughout the market day.
Cryptocurrencies themselves trade 24/7 because, unlike stocks and commodities, the cryptocurrency market is not a regulated exchange. This happens on a decentralized network of computers.
Bitcoin ETFs, whether spot or futures focused, only trade during market hours.
A spot ETF differs from a futures ETF in that a spot ETF tracks the current price of the underlying asset, while a futures ETF tracks the potential future prices of the underlying asset. underlying.
Futures ETFs deal with the trading of futures contracts, which are complex derivative products best suited for direct trading only by experienced investors.
Is cryptocurrency a safe investment?
Cryptocurrency markets have seen a tremendous resurgence in 2023, with Bitcoin closing the year up 156%. In the view of many investors, this rebound brought an end to the crypto winter of 2022, exemplified by the rapid collapse of crypto exchange FTX in November 2022.
Due to the collapse of FTX and other circumstances, US regulators have cracked down on exchanges and other companies that trade and create cryptocurrencies.
SEC Chairman Gary Gensler has said in the past that his agency believes that most cryptocurrencies are in fact securities and therefore fall within the scope of a plethora of already existing rules and legal precedents .
This claim was further asserted in SEC filings against a handful of crypto exchanges and companies, including Binance and Coinbase, alleging that these entities engaged in the sale and transfer of securities without a license.
However, Gensler and the SEC have also said that bitcoin itself is likely a commodity – not a security – and should be regulated by the CFTC, not the SEC.