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Bitcoin Extends Early May Slump, Dropping to $57,000 as Fed Leaves Rates On Hold
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Bitcoin fell to its lowest level in more than two months in early May, as the Federal Reserve kept interest rates steady.
The cryptocurrency fell 5% at one point 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 latest interest rate decision from the Federal Reserve, which concluded its two-day policy meeting Wednesday afternoon. The central bank retained its benchmark short-term borrowing rate unchanged, as expected. The federal funds rate has been in a target range between 5.25% and 5.50% since July 2023.
“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.”
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Bitcoin falls to lowest level since February
Bitcoin briefly rebounded as high as $60,989.58 before reversing lower.
“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. His withdrawal from Historic highs in March intensified this week amid broader risk aversion. Bitcoin is down more than 10% for the week, and on Tuesday it posted its worst month since November 2022.
Kendrick also highlighted five straight days of outflows from US Bitcoin ETFs and a “bad” reaction to the spot bitcoin ETF launched in Hong Kong this week. Bitcoin’s drop also comes a day after former Binance CEO Changpeng Zhao was sentenced to four months in prison on money laundering charges.
Bitcoin investors expect the cryptocurrency to see a strong rally later this year, but say its price could continue chopping for the next few weeks given macroeconomic 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.