On Wednesday, the price of Bitcoin experienced a decline, extending its downward trajectory from the previous session, as market sentiment remained constrained by anticipation surrounding a Federal Reserve meeting and crucial inflation data.
The world’s largest cryptocurrency dipped by 0.8% over the past 24 hours, reaching $67,372.3 by 01:34 ET (05:34 GMT). The decline saw Bitcoin briefly touch as low as $66,000 on Tuesday.
Bitcoin’s recent trading sessions have been marked by volatile swings, with the cryptocurrency reaching highs near $72,000 amidst lingering uncertainty about U.S. interest rates.
Heightened interest rates tend to diminish the appeal of risk-driven assets like cryptocurrencies, while simultaneously posing challenges for the sector by restricting liquidity levels. Consequently, traders have been shifting away from Bitcoin and other cryptocurrencies this week, favoring assets perceived to be more insulated against rate fluctuations, such as the dollar.
Despite data indicating inflows of $2 billion into Bitcoin and other crypto investment products during the first week of June, this surge in investment activity has not been reflected in the cryptocurrency’s price.
Market expectations ahead of the Fed meeting suggest that while interest rates are likely to remain unchanged, there is potential for the central bank to adopt a more hawkish stance, particularly in light of persistent inflationary pressures and a resilient labor market.
Ahead of the Fed’s decision, market participants are also awaiting key consumer price index data, scheduled for release on Wednesday, which is anticipated to confirm sticky inflation levels throughout May.
Recent concerns surrounding the labor market and inflation have prompted traders to scale back expectations of a rate cut in September, bolstering the dollar and exerting downward pressure on crypto prices.
Altcoins Experience Declines Amid Rate Uncertainty
In addition to Bitcoin’s decline, major altcoins faced downward pressure on Wednesday amidst ongoing uncertainty surrounding U.S. interest rates.
Ether, the second-largest cryptocurrency by market capitalization, declined by over 1% to $3,511.91, erasing some of the gains accrued in May driven by anticipation surrounding a spot Ether exchange-traded fund.
Other prominent altcoins, including ADA, XRP, and SOL, experienced declines ranging from 1.2% to 2.5%. Meme tokens such as DOGE and SHIB also registered losses of 1.5% and 2.4%, respectively.
Sentiment towards meme tokens appeared to mirror the cooling interest in meme stocks, with GameStop Corp (NYSE: GME) witnessing a substantial reversal of gains made in late May following a resurgence in social media activity by a prominent influencer after an extended hiatus.
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