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Bitcoin fell to its lowest level in more than two months by early May as the Federal Reserve kept interest rates steady.
At one point, the cryptocurrency 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 were focused on the latest interest rate decision from the Federal Reserve, which wrapped up its two-day policy meeting Wednesday afternoon. As expected, the central bank kept its benchmark short-term borrowing rate unchanged. Beginning in July 2023, the federal funds rate is within a target range of 5.25% to 5.50%.
“The broader macroeconomic backdrop has weakened for assets such as cryptocurrencies, which thrive on liquidity,” Jeff Kendrick, head of digital assets research at Standard Chartered, said on Wednesday. “Broader US liquidity measures… have deteriorated rapidly since mid-April.”
Bitcoin falls to lowest level since February
Bitcoin briefly rose to $60,989.58 before turning lower.
“Higher 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 a rate cut is not ruled out. The expectation of future rate cuts will support the price of Bitcoin and the broader cryptocurrency markets.”
Bitcoin has been trading in a tight range and is now backed by key cryptocurrency catalysts – US ETFs and the halving. The pullback from March highs has intensified this week amid broader risk sentiment. Bitcoin fell more than 10% in a week, and on Tuesday it posted its worst month since November 2022.
Kendrick also pointed to five straight days of outflows from Bitcoin ETFs in the US and a “poor” response to the launch of spot Bitcoin ETFs in Hong Kong this week. Bitcoin’s fall also came a day after former Binance CEO Changpeng Zhao was sentenced to four months in prison on money laundering charges.
Bitcoin investors expect a strong recovery for the cryptocurrency later this year, but say its price could continue to decline over the next few weeks given macroeconomic and geopolitical pressures.
“We could see Bitcoin prices consolidating over 1-2 months, trading in a range with $10,000 swings either way,” Bitfinex analysts said. “We expect the positive impact of the halving, which has reduced the supply of Bitcoin, to be visible in the coming months.”
— CNBC’s Michael Bloom and Jeff Cox contributed reporting.