Bitcoin faced a sharp decline of nearly 6% on Wednesday, marking its worst monthly performance since late 2022, as investors pulled out of cryptocurrencies ahead of the Federal Reserve’s interest rate decision.
The world’s most traded cryptocurrency saw a significant drop of almost 16% in April, as investors capitalized on profits from a recent rally that had pushed the price above $70,000.
Bitcoin plummeted by as much as 5.6% to its lowest point since late February, currently standing at $57,001. Ether, the second-largest cryptocurrency, also experienced a decline of 3.6% to $2,857, its lowest level since February.
Bitcoin’s current price is 22% below its March record of $73,803, technically placing it in a bear market. However, it is still up 35% year-to-date and has doubled compared to the same time last year, largely due to significant investments in exchange-traded funds since January.
Bitcoin Investors Taking Profits
Fineqia’s research analyst, Matteo Greco, credited the recent downturn to investors taking profits, particularly those who entered the market during the 2022 and 2023 downturns. He also noted that ETF investors have seen substantial price appreciation since entering the market in early 2024.
In response to the market downturn, U.S. premarket trading saw a decline in crypto-related stocks. Shares in Coinbase fell 4.6%, while miners Riot and Marathon Digital dropped 4.2-4.3%.
Looking at the macroeconomic landscape, the Federal Open Market Committee (FOMC) is not expected to make any changes to interest rates. However, investors are beginning to believe that the central bank may not cut rates at all this year, which could negatively impact interest rate-sensitive assets like cryptocurrencies, emerging market stocks, bonds, and commodities.
Investors have reacted by withdrawing from the 10 largest U.S. spot bitcoin ETFs, leading to their largest weekly outflow since their inception in January. This week, outflows have reached $496 million, primarily due to a slowdown in flows into BlackRock’s iShares Bitcoin Trust, which is the largest in terms of holdings.
Even smaller alt-coins, which sometimes benefit from weakness in major tokens, have not been spared. Solana’s sol token, dogecoin, and shiba inu have all lost almost a quarter of their value over the last seven days.
Halving Event
Despite the recent “halving event,” which took place last month and aims to reduce the rate at which new bitcoins are created, bitcoin’s price has continued to decline, dropping by about 15% since April 20. Many investors had bought into the market ahead of the event, anticipating a positive impact on prices.
Alex Kuptsikevich, a senior market analyst for the FXPro platform, believes that bitcoin’s decline is entering a new phase. He pointed out that May is historically a month of weakness for bitcoin and highlighted price levels of $55,700 and $51,000-52,000 as areas of focus.
Kuptsikevich also noted that the upcoming FOMC announcements and monthly jobs data could further accelerate or reverse the current downtrend in bitcoin’s price.
