Bitcoin faced a downturn amidst waning interest in dedicated US exchange-traded funds (ETFs) and diminishing expectations for looser monetary policy from the Federal Reserve.
The digital currency experienced a drop of up to 5.3%, though it partially recovered to trade at $66,735 as of 1:10 p.m. Tuesday in Singapore. Concurrently, other tokens popular among meme investors, such as Pepe and dogwifhat, also saw declines, leading to a significant slump in smaller digital assets over the course of two days, marking its most substantial decline in about a fortnight.
This year’s robust rally in the cryptocurrency market is losing momentum as persistent price pressures in the United States prompt investors to scale back on their expectations for interest rate cuts by the Fed. This shift has led to increased Treasury yields and a stronger dollar, creating a less favorable environment for speculative sectors like digital assets.
Stefan von Haenisch, head of trading at OSL SG Pte, remarked, “The altered perceptions regarding the Fed are reverberating across the crypto sphere, resulting in a selloff as the week begins. No sector remains unaffected, particularly those that have outperformed Bitcoin in the last six months, such as meme coins.”
Bitcoin has seen a decline of approximately 10% since reaching its peak of $73,798 in mid-March. The influx of daily investments into US spot Bitcoin ETFs has tapered off, putting pressure on the leading digital asset. On Monday, investors withdrew a net total of $86 million from the pool of 10 products, which have collectively attracted around $12 billion since their launch on January 11, according to data compiled by Bloomberg.
Richard Galvin, co-founder of DACM, commented, “The crypto market appeared ‘weak’ over the past 12 hours following the release of the latest US economic data.”
The data revealed an unexpected expansion in US manufacturing, marking the first growth since September 2022, alongside a rise in input costs. Consequently, the amount of Fed easing priced into swap contracts for this year dropped to approximately 65 basis points, lower than what policymakers had anticipated.
Additionally, the supply of new Bitcoin tokens is poised to halve this month, a once-in-four-years event that some traders perceive as supportive of the cryptocurrency. However, others argue that further gains may be challenging to achieve, given that the token has quadrupled in value since the beginning of 2023.
