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Bitcoin The US dollar fell to its lowest level in over two months at the start of May as the Federal Reserve kept interest rates stable.
The cryptocurrency temporarily fell 5% to $56,526.00, its lowest level since February 27, according to CoinMetrics. It was last down about 4% at $56,954.13.
Investors focused on the Federal Reserve's latest interest rate decision, which concluded its two-day policy meeting on Wednesday afternoon. As expected, the central bank left its benchmark interest rate for short-term loans unchanged. The federal funds rate has been in a targeted range of between 5.25% and 5.50% since July 2023.
“The overall macroeconomic environment has deteriorated for assets such as cryptocurrencies that thrive on liquidity,” Geoff Kendrick, head of digital asset research at Standard Chartered, said in a note on Wednesday. “Broader liquidity measures in the U.S. … have deteriorated rapidly since mid-April.”
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Bitcoin falls to its lowest level since February
Bitcoin briefly rose as high as $60,989.58 before heading back down.
“Higher real interest rates have likely supported the dollar and weighed on Bitcoin over the last month,” said Zach Pandl, head of research at Grayscale Investments. “The FOMC statement expressed concern about inflation, but did not take rate cuts off the table. Expectations of future interest rate cuts would support Bitcoin price and crypto markets in general.”
Bitcoin has been trading in a tight range, with the cryptocurrency's key catalysts – US exchange funds and the halving – now behind it. The decline from March all-time highs intensified this week amid broader risk-off sentiment. Bitcoin has fallen more than 10% this week and recorded its worst month since November 2022 on Tuesday.
Kendrick also pointed to five consecutive days of outflows from US Bitcoin ETFs and a “poor” 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 on money laundering charges.
Bitcoin investors are expecting a strong recovery in the cryptocurrency later this year, but believe the price could fall further in the next few weeks due to macroeconomic and geopolitical pressures.
“We could see a 1-2 month consolidation in Bitcoin prices, in a range with fluctuations of $10,000 on either side,” analysts at Bitfinex said. “We expect the positive impact of the halving, which has resulted in a decline in Bitcoin supply, to become apparent in later months.”
—CNBC's Michael Bloom and Jeff Cox contributed reporting.