Bitcoin prices fell again on April 2nd as demand for a US spot exchange-traded fund (ETF) waned and bets on a dovish pivot by the Federal Reserve diminished. The cryptocurrency's strong rally this year is losing steam as persistent U
Bitcoin prices fell again on April 2nd as demand for a US spot exchange-traded fund (ETF) waned and bets on a dovish pivot by the Federal Reserve diminished. The cryptocurrency's strong rally this year is losing steam as persistent U.S. price pressures lead investors to pare back wagers on Fed rate cuts, sending Treasury yields and the dollar higher. The crypto market has looked "soft" over the past 12 hours following the latest U.S. economic data, according to Richard Galvin, co-founder of DACM.
Cooling Demand for US Spot ETFs
The launch of a U.S. spot ETF was once seen as a major catalyst for the cryptocurrency market. These ETFs provide institutional investors with an easy way to gain exposure to cryptocurrencies, an asset class they have been largely cautious about. However, demand for a U.S. spot ETF has recently cooled, which could be a contributing factor to the decline in Bitcoin's price.
Shifting Fed Policy Expectations
Markets had previously anticipated the Fed would begin cutting interest rates in 2023 as inflation eased. However, recent economic data has suggested that inflationary pressures are more persistent than expected. This has led investors to reduce their bets on Fed rate cuts, pushing up Treasury yields and the dollar.
Higher interest rates and a stronger dollar are a headwind for risky assets like Bitcoin. Investors may opt to shift their funds to safer, higher-yielding investments as the opportunity cost of holding these assets increases.
Market Reaction
Amid these converging factors, the crypto market has traded softly over the past 12 hours. Bitcoin prices have dipped below $45,000, with other major cryptocurrencies like Ethereum also trading lower.
Industry Expert Insights
"The crypto market has looked soft" following the latest U.S. economic data, according to Richard Galvin, co-founder of DACM. He believes that persistent inflationary pressures and shifting Fed policy expectations are weighing on cryptocurrencies.
Implications for the Outlook
Whether the recent pullback in Bitcoin's price will be a long-term trend remains to be seen. However, the cooling demand and shifting Fed policy expectations will likely continue to weigh on the cryptocurrency market in the foreseeable future. Investors should proceed with caution and carefully weigh the risks and rewards before making any investment decisions.
Bitcoin's price decline reflects the ongoing challenges facing the cryptocurrency market. Weakening demand and shifting Fed policy expectations will likely continue to pressure the market for the foreseeable future. Investors should remain cautious and monitor future developments closely.
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