Bitcoin’s value drops to lowest point in two months as Federal Reserve indicates it’s not prepared to reduce rates
Bitcoin experienced a decline in price, dropping to approximately $57,000 per unit on Thursday, marking a two-month low following the release of minutes from the U.S. Federal Reserve’s June meeting. The data revealed the central bank’s reluctance to reduce interest rates at this time. By 2:30 p.m. London time, the digital currency had fallen by about 5% over 24 hours to $56,837, slipping below the $57,000 threshold for the first time since May 1 as reported by CoinGecko. Bitcoin has since slightly recovered, trading at $57,932.57, down 3.4% by 5:05 p.m. London time. In parallel, the rival token ether, the world’s second-largest cryptocurrency, experienced a 5% decline to $3,120.
The recent price pressure on bitcoin can be attributed to the Federal Reserve’s stance on interest rates as indicated in the minutes from the June meeting, where officials expressed caution about lowering rates until there is clear evidence of inflation moving steadily towards the central bank’s 2% target. Higher interest rates are generally unfavorable for bitcoin and other cryptocurrencies as they tend to curb investor risk appetite. Bitcoin surged to an all-time high exceeding $73,700 in March this year following the approval of the first U.S. spot bitcoin exchange-traded fund (ETF) by the Securities and Exchange Commission.
ETFs enable investors to track bitcoin’s price without owning the actual cryptocurrency, a development seen as legitimizing the asset class and facilitating greater participation by institutional investors. However, since then, bitcoin has been trading within a range of approximately $59,000 to $72,000. Recent news of the collapsed bitcoin exchange Mt. Gox preparing to distribute around $9 billion worth of coins to users has also impacted bitcoin’s price, anticipated to trigger significant selling activity.
Despite these challenges, analysts at CCData noted that bitcoin has not yet reached the peak of its current appreciation cycle and is likely to achieve a new all-time high. Historical market cycles have shown that bitcoin’s “halving” event, which reduces the supply of new bitcoins, typically precedes a period of price expansion lasting between 12 to 18 months before reaching a cycle peak.
The most recent bitcoin halving occurred on April 19 this year, suggesting that historical patterns are yet to unfold. CCData observed a decline in trading activity on centralized exchanges for nearly two months post-halving in previous cycles, indicating a potential extension of the current cycle into 2025. Additionally, prominent bitcoin advocate Tom Lee remains optimistic about bitcoin’s future, maintaining his forecast of bitcoin reaching $150,000 despite the looming impact of Mt. Gox’s distribution of tokens to creditors. Lee anticipates a significant rebound in the cryptocurrency market in the second half of the year as the overhang from Mt. Gox diminishes.
