Bitcoin has lost about 0.08% of its value in 24 hours to trade at 27,632. There were no crypto-related events that may have had an impact on the price of the leading cryptocurrency. Therefore, regulatory control and Fed concern are the only factors to consider. The US dollar moved higher but was on course for a second consecutive monthly decline ahead of the unveiling of further economic data that would likely give more insight into the future path of interest rates. The dollar index (DXY), which is now trading at 101.65, has been negatively impacted by worries that the US economy is on the verge of a dramatic decline.
- BTC/USD has dropped by over 10% in a week.
- The upcoming US Fed’s policy-setting meeting will probably result in a further rate hike of 25 basis points.
- Crypto assets and BTC have been subject to significant selling pressure due to a shift in the Fed’s stance towards further tightening policy.
Fed Fear Regarding Interest Rates Increased
On Friday of last week, US private sector PMI decreased the likelihood of an impending US recession while raising the possibility of a rate hike in June. Positive indicators depict a robust US economic recovery and a potentially significant increase in labor demand. As a result, the Fed must hike rates once more to maintain pressure on persistent inflation.
The US GDP and unemployment claims on April 27 and the PCE Index print for March on April 28 will be of interest to traders. The Federal Open Market Committee (FOMC) meeting in May, at which the Fed will decide on its next interest rate adjustments, is also on the horizon for traders. If the PCE Index rises, the FED could consider interest rate hikes again in June, which would cause Bitcoin to decline.
Moreover, Chair Jerome Powell has stated that the market is in a wait-and-see position until the final figures are out and that the strength or absence of interim macro data prints significantly impacts that decision.
However, according to CME Group’s FedWatch Tool, the consensus is now strongly in favor of yet another rate rise, which would put more pressure on US banks and the larger financial system. The probability of another 25bp increase is presently 89%.
Additionally, traders’ appetite for risk decreased due to worries of a Fed-driven economic crisis, which put additional pressure on the whole crypto market. The Fed may need to consider raising interest rates in June if US economic figures this week will come stronger than expected. Therefore, the BTC/USD price dropped, and Bitcoin experienced high selling pressure.
Dollar Liquidity Declines and Weighed on Bitcoin
Bitcoin and the broader cryptocurrency market have closely mirrored regional fluctuations in the dollar liquidity index.
According to data provider TradingView, the USD Liquidity Conditions Index, which tracks the supply of the dollar in the financial system, dropped to $6.13 trillion, hitting its lowest level in almost a month.
As a result, market sentiments declined, and Bitcoin (BTC/USD) experienced selling pressure in the week ending April 23 as US dollar liquidity fell.