The price of Bitcoin declined on Wednesday, below key support levels, as anticipation of the Federal Reserve meeting led traders away from speculative assets like cryptocurrencies. Recent data showing outflows from Bitcoin investment products, especially Exchange-Traded Funds (ETFs), also impacted sentiment.
Meanwhile, the launch of new instant cryptocurrency investment funds in Hong Kong offered little support. Bitcoin losses coincided with a sharp rise in the dollar on Tuesday, pushing the American currency towards its highest level in six months.
Traders were largely biased towards the dollar ahead of the Federal Reserve meeting on Wednesday, widely expected to keep interest rates steady. However, Fed Chairman Jerome Powell is likely to strike a delicate balance, especially in the wake of several inflation readings hotter than expected. It is now expected that the central bank will begin lowering interest rates by September, if at all.
High interest rates in the United States for a longer period do not bode well for Bitcoin and the broader cryptocurrency industry, as the space typically thrives in a low-interest, high-liquidity environment. This idea has also been a major driver of capital outflows from cryptocurrency investment products in recent weeks, as the noise around instant Bitcoin investment funds diminishes in the face of prolonged higher interest rates.
