After recording its worst monthly performance since late 2022, bitcoin fell nearly 6% on Wednesday as investors withdrew their funds from cryptocurrencies ahead of the Federal Reserve's later announcement regarding interest rates.
The most popular cryptocurrency in the world saw a value decline of almost 16% in April as investors booked profits on a spectacular rally that saw the price soar above $70,000.
Bitcoin dropped to its lowest point since late February, down as much as 5.6%. It was down 4.8% at $57,001 at the last moment, while ether saw less severe losses, down 3.6% at $2,857, which was also the lowest level since February.
Currently, the price of bitcoin is 22% below its all-time high of $73,803 set in March, indicating a bear market. Nevertheless, it has still increased by 35% so far this year and has doubled from this time last year, largely because of the billions of dollars that have been invested in recently established exchange-traded funds since January.
"Investors who entered the market during the downturns of 2022 and 2023, as well as ETF investors who witnessed significant price appreciation on their shares after entering the market in the early weeks of 2024, can be held partially responsible for the recent downtrend," said Matteo Greco, research analyst at Fineqia.
In US premarket trading, stocks linked to cryptocurrencies dropped. Coinbase's stock dropped 4.6%, while Riot and Marathon Digital's mining stocks dropped 4.2-4.3%.
The Federal Open Market Committee (FOMC) is not anticipated to alter interest rates on a macro level, but investors are beginning to believe that the central bank might not lower rates at all this year, which would be devastating for interest rate-sensitive assets like cryptocurrencies, emerging market stocks and bonds, and even commodities.
Investors have made the appropriate response. Since their launch in January, the top ten U.S. spot bitcoin exchange-traded funds (ETFs) have seen their largest weekly withdrawal.
According to LSEG data, outflows have reached $496 million this week, primarily as inflows into BlackRock's iShares Bitcoin Trust, the largest in terms of holdings, have slowed.
Smaller altcoins have also suffered, despite the fact that they occasionally stand to gain from flaws in the two major tokens. Data from cryptocurrency website Coingecko reveals that Solana's sol token, along with meme coins dogecoin and shiba inu, which were both partially popularized in 2021 by Tesla owner Elon Musk, have lost nearly a quarter of their value in the last seven days.
The alleged "halving event" for Bitcoin that occurred last month did not significantly boost its value. Since the halving on April 20, the price of bitcoin has decreased by about 15%. A change to the cryptocurrency's underlying technology intended to slow down the creation of new bitcoins is what attracted a lot of investors to the market in the lead-up to the event.
According to Alex Kuptsikevich, a senior market analyst for the FXPro platform, the decline in bitcoin is moving into a new phase from a charting standpoint.
In addition to May being a month of seasonal weakness for bitcoin, he said the recent price leg down puts $55,700 and $51,000–52,000 into focus.
Nevertheless, he stated, "there is enough potential to accelerate or reverse the downtrend in both the FOMC announcements later today and the monthly jobs data on Friday."
