Due to large outflows of Bitcoin from Grayscale and a hawkish tone from the Federal Reserve, the price of Bitcoin has been declining over the past three days.
The cost of Bitcoin tickers down $42,947 down 1.8%, reaching a low of $41,860 on February 1. The price’s failure to break over a crucial resistance level of $43,850 two days ago sparked a larger correction, which includes the current dip. A number of the reasons that are covered below seem to be influencing its continuous decline.
Interest Rate Forecasts From The Fed Regarding Bitcoin
The recent Federal Reserve rate decision was made at the same time as the price decrease. The U.S. Federal Reserve voted on January 31 to keep interest rates at 5.25% to 5.5%. Jerome Powell, the head of the bank, dashed expectations of a rate reduction in March. He said that rate reductions will only be taken into account when there is increased assurance that inflation will continue to decline.
Risk assets, like Bitcoin, are seen negatively by the Fed’s aggressive position. The likelihood of rising borrowing rates due to the lack of a rate drop might discourage investment in more volatile assets like cryptocurrency. This week’s market FUD has also been fueled by withdrawals from the GBTC and worries over the possible leak of the same from the now-defunct Mt. Gox platform. Market concerns around the U.S. government’s intention to auction off 2,934 BTCs valued at approximately $120 million have increased since its announcement on January 26. However, it should be mentioned that some of the selling pressure has been seen by other spot BTC ETF providers, such as Fidelity and BlackRock. The latest drop in their price comes after miners distributed the cryptocurrency. Notably, starting November 11th, the 30-day change in the amount of BTC stored at miner addresses has been negative. Put differently, the majority of miners have been selling their holdings both before and after the adoption of the BTC ETF.