Cryptocurrencies Fall as Investors Await Fed Decision; Bitcoin Dips to $66,475

Key Takeaway

• Bitcoin fell over 4% to $66,475, and Ether dropped 6.1% to $3,452.02 as investors await the Fed's rate decision.
• Crypto-related equities like Coinbase and MicroStrategy also declined more than 4%, with Marathon Digital and Riot Platforms down over 2%.
• Market sentiment is impacted by fears that the Federal Reserve may not cut interest rates this year, leading to increased volatility.

Bitcoin and Ether Decline

Cryptocurrencies experienced a significant downturn on Tuesday, with Bitcoin leading the slide. Bitcoin's price dropped over 4% to $66,475, according to Coin Metrics, continuing a decline that began last Friday when it retreated from the $70,000 level. Ether, the second-largest cryptocurrency, fell 6.1% to $3,452.02. The broader crypto market also saw red, with crypto-related equities such as Coinbase and MicroStrategy each down more than 4%, and miners Marathon Digital and Riot Platforms losing over 2%.

The downturn in Bitcoin may have been exacerbated by a wave of long liquidations, forcing traders to sell their assets at market prices to settle debts. CoinGlass reported $56 million in long Bitcoin liquidations over the past 24 hours, mirroring another $56 million in liquidations that occurred last Thursday. This liquidation activity followed a better-than-expected May U.S. jobs report, which added to the market's volatility.

Federal Reserve's Impact

The Federal Reserve's upcoming rate decision has been a significant factor influencing the crypto market. Like stock market investors, crypto traders are concerned that the Fed may not reduce interest rates this year. The central bank has commenced its two-day policy meeting, with a decision expected on Wednesday. The Dow Jones Industrial Average lost 272 points on Tuesday, while the S&P 500 fell 0.3%.

Bartosz Lipiński, CEO of Cube.Exchange, commented on the situation: "When equities sell-off, other risk assets follow. This feels largely like the market is losing confidence that the Federal Reserve will cut interest rates anytime soon … and greater fears about the impact of high rates over the long-term are beginning to take hold." Lipiński also noted that the sell-offs on Tuesday and last Friday are further evidence of the ongoing "malaise" in the market. Despite strong underlying fundamentals for Bitcoin, such as supply being hoarded by ETFs, sentiment has yet to catch up.

ETF Outflows and Broader Market Trends

Bitcoin's decline was also influenced by outflows from U.S.-listed spot Bitcoin ETFs. According to provisional data from Farside Investors, there were $64.9 million in cumulative outflows, marking the first loss since at least May 23. These outflows followed recent strong inflows, which market chatter suggests were driven by institutions' interest in non-directional basis trades rather than outright bullish bets.

In traditional markets, Asian stocks also faced a risk-off day. Chinese stocks fell over 1%, leading losses in the Asian equity indices amid property market concerns and reports that the Bank of Japan might trim its liquidity-boosting bond purchases this week. The dollar index consolidated on two-day gains, while U.S. Treasury prices ticked higher, pushing yields lower. The yield on the benchmark 10-year note fell by three basis points to 4.45%.

Street Views

• Bartosz Lipiński, Cube.Exchange (Bearish on the cryptocurrency market):

  "This feels largely like the market is losing confidence that the Federal Reserve will cut interest rates anytime soon … and greater fears about the impact of high rates over the long-term are beginning to take hold."
  "One look at options positioning shows long-term expectations are for a rally. For now though, we may continue to see volatility until there is a clearer picture of the Fed’s plans for the remainder of the year."
  "Despite spot ETH ETFs seemingly being on the verge of coming to the market in the U.S., there has been no real catalyst to drive prices higher. Underlying fundamentals are strong for bitcoin, with supply being hoarded by ETFs, but sentiment has yet to catch up."