Earlier in the day, a broader risk-off move in currency markets saw traders pivot into the dollar while collecting profits in Bitcoin after it surged to record highs of over $73,000 earlier in March.
The dollar index hit a two-week high before the conclusion of a Fed meeting later in the day, where the central bank is widely expected to keep rates steady and offer more cues on when it plans to begin cutting interest rates.
Bitcoin price had fallen as far as $60,771.1 earlier in the day.
Adding to the downward pressure on Bitcoin, the token saw a flash crash on crypto exchange BitMEX, where it sank as low as $8,900 following a series of massive sell orders on Tuesday. BitMEX said it was investigating potential wrongdoing.
Since reaching its recent all-time highs, the entire cryptocurrency market had lost approximately $400 billion in value, with significant declines also seen in other digital currencies like Ether and Solana. However, ahead of the FOMC meeting, Bitcoin and other cryptocurrencies have made some gains.
“We are seeing a natural market shift at this point, which is a culmination of several important factors,” Nejc Krzan, head of NiceX Exchange, told Investing.com.
Among other things, he added that “many investors who recently came into the market who were hoping the BTC price would continue to break through the all time high and rise further, have sold to take short term gains.” This is likely the key reason why Bitcoin price is correction from fresh record highs.
Looking ahead, Jonny Huxtable, CEO of LinkPool, told Investing.com that they “anticipate sideways, downwards chop going into the halving and for some time after it similar to the 2015-2017 uptrend.”
“BTC is seeing more demand than ever, and with its daily output about to be cut in half, we anticipate an unprecedented market reaction to the great supply shock BTC will face to date,” he added.
The Federal Open Market Committee has given a boost to risk sentiment by adjusting growth and rate projections upwards. This way, the FOMC signals a belief in the economy’s ability to achieve a ‘soft landing’, creating a favorable scenario for risk assets, including Bitcoin.
The Federal Reserve’s revision of its 2024 growth forecast aligns with current consensus views, but it has also increased its projections for 2025 and 2026 to 2%, showing even more optimism than many economists. Moreover, with unemployment forecasts remaining stable, the Fed does not foresee a significant rise from the current 3.9%.
Fed Chair Powell presented a relatively dovish perspective during his press conference. He suggested that the recent inflation data’s potential seasonal influences do not alter the overall narrative of cooling price increases and the possibility of reduced interest rates.
Powell also indicated that the pace of Quantitative Tightening (QT) might soon decelerate.
Data from digital asset manager CoinShares showed earlier this week that Bitcoin-linked investment products saw total inflows of $2.86 billion in the past week, as its recently-approved ETFs continued to garner investor interest.
But the Grayscale Bitcoin Trust (BTC) (NYSE: GBTC) saw sustained outflows, of a whopping $1.25 billion over the past week. This saw the fund manager’s assets under management sink by about $2 billion in the past week, adding to the selling pressure on Bitcoin.
Still, Bitcoin remained up around 50% so far in 2024, having seen massive buying after the Securities and Exchange Commission approved spot ETFs in U.S. markets.
Anticipation of the token’s halving event, which halves the rate at which new Bitcoin is generated every four years, is also expected to support the cryptocurrency. The halving event is due to take place in April.
Analysts said that the current weakness in Bitcoin presented a buying opportunity for the token ahead of its halving.
(Ambar Warrick, Vahid Karaahmetovic, and Sam Boughedda contributed to this article.)
Source: Cryptocurrency - investing.com
