The logo of the cryptocurrency Bitcoin (BTC) can be seen on a coin in front of a Bitcoin chart.
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Bitcoin The stock market fell sharply to its lowest point in more than two months on Wednesday as investors closely watched the Federal Reserve’s upcoming interest rate decision and a general risk aversion sentiment emerged.
Data from CoinGecko showed that the world’s most valuable digital currency fell to $56,757.93, falling below $57,000 for the first time since February 28.
Bitcoin fell 6.3% on Wednesday to $57,505.24.
Rival cryptocurrencies ether, solana and XRP fell 4.5%, 5.9% and 1.4% respectively.
Cryptocurrency market participants are watching the Federal Reserve’s upcoming interest rate decision. The Federal Open Market Committee is scheduled to meet Wednesday afternoon to discuss its latest interest rate policy.
Markets have become more volatile of late as investors fret over the prospect of a longer path to rate cuts. Investors are looking to Federal Reserve Chairman Jerome Powell for clues on what needs to happen before interest rates fall.
As we all know, Bitcoin trading is more similar to traditional risk assets such as stocks. Its supporters describe it as a hedge against rising inflation, but the token’s performance has been mixed.
Geoff Kendrick, head of digital asset research at Standard Chartered Bank, said in a report released on Wednesday that Bitcoin’s fall below $60,000 “has now reopened the route to the 50-52k range.”
“The drivers appear to be a combination of cryptocurrency-specific and broader macro factors,” Kendrick said.
He noted that the main factors affecting the coin were five consecutive days of outflows from U.S. spot Bitcoin exchange-traded funds, as well as a deteriorating macro backdrop and worsening market liquidity.
Kendrick added that the response to the launch of a spot Bitcoin ETF in Hong Kong earlier this week was “poor,” with the ETF’s first-day trading volume being only in the millions of dollars, despite a solid net asset position.
“Of course, liquidity is important when it matters, but it is important now amid strong U.S. inflation data and the slim chance of a Fed rate cut,” Kendrick said in the note.
The drop in cryptocurrency market prices comes a day after former Binance CEO Changpeng Zhao was sentenced to four months in prison on money laundering charges.
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