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Why is Bitcoin down today? – Forbes Advisor
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Bitcoin (BTC) continues its downward trend today as cryptocurrency investors digest the results of the latest Federal Open Market Committee, or FOMC, meeting. After the Fed held interest rates steady at its June meeting, many have given up hope of significant rate cuts before the end of the year, sending cryptocurrencies tumbling.
While bitcoin is still up more than 45% year-to-date, the world’s oldest cryptocurrency has fallen more than 5% in the past 24 hours. That means bitcoin, which rose to an all-time high above $73,000 in March, is back down to $61,000.
Ethereum (ETH), the world’s leading altcoin, has also fallen by more than 5% in the past 24 hours, bringing the price of ETH back to around $3,300. The decline in the price of Bitcoin has affected almost the entire cryptosphere.
Other major altcoins are also down. Solana (SOL) and BNB Coin (BNB) are down 3% each. 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 decline after the June FOMC meeting. The Fed held the Federal funds rate stable, dashing any hopes of a rate cut in the first half of the year and spooking some cryptocurrency investors.
Lower interest rates tend to allow money to flow into more speculative assets, such as cryptocurrencies, increasing their value.
Bitcoin’s price decline today is a continuation of that trend that began after the June FOMC meeting. Over the past two weeks, outflows from cryptocurrency exchange-traded funds (ETFs) have reached $1.2 billion. Bitcoin has fallen more than 6% in the past week.
As the cryptocurrency industry weighs in on the Fed’s latest interest rate decision, it is also anxiously awaiting another key metric. May personal consumption expenses, or PCE, the price index is due this Friday. This is the Fed’s preferred inflation indicator and therefore can have a significant impact on markets.
The cryptocurrency market is usually nervous before the release of the PCE and investors will be waiting for a positive signal indicating that inflation is under control and that a rate cut may occur at the next FOMC meeting.
While this recent drop in bitcoin is unlikely to have a major impact on the overall price action of the cryptocurrency, any negative news from the PCE report could hamper bitcoin’s recent strong performance in the short term.
Bitcoin has been in a bull market since November
Bitcoin has been in a strong upward trend since November last year. It rose from $34,000 in late October to over $73,000 in March.
After the United States Securities and Exchange Commission On January 10, 11 new spot bitcoin exchange-traded funds were approved; bitcoin has been on an uptrend, gaining over 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 trade directly on exchanges throughout the market day.
Cryptocurrencies themselves are traded 24/7 because, unlike stocks and commodities, the cryptocurrency market is not a regulated exchange. It occurs through a decentralized network of computers.
Bitcoin ETFs, whether spot or futures-focused, trade only 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 potential future prices of the underlying asset.
Futures ETFs engage in the trading of futures, which are complex derivative products best suited for direct trading by sophisticated investors only.
Is Cryptocurrency a Safe Investment?
Cryptocurrency markets have seen a remarkable recovery in 2023, with Bitcoin closing the year up 156%. Many investors believe this rebound has ended the crypto winter of 2022, exemplified by the rapid collapse of cryptocurrency exchange FTX in November 2022.
Following 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 actually securities and therefore fall under the scope of a plethora of existing rules and legal precedents.
This claim was further advanced in SEC filings against a handful of cryptocurrency exchanges and companies, including Binance and Coinbase, alleging that these entities were engaged in the sale and transfer of securities without a license.
However, Gensler and the SEC also argued that bitcoin itself is likely a commodity, not a security, and should be regulated by the CFTC, not the SEC.