Bitcoin Tumbles 2.9% Ahead of FOMC Decision and CPI Report

• Bitcoin experiences a decline of 2.9% ahead of significant economic reports and meetings.
• Market anticipates the Federal Reserve to maintain current interest rates.
• Core CPI is predicted to remain above FOMC’s long-term target.

Bitcoin tumbles ahead of FOMC meeting and CPI report, sparking market speculations and ETF outflows.

Federal Reserve Expected to Hold Interest Rates Steady

The Federal Reserve is poised to announce its interest rate decision tomorrow. Based on data from the CME FedWatch Tool, market sentiment strongly leans towards the expectation that rates will remain unchanged. This decision comes in the context of rising inflation rates, as evidenced by the upcoming Consumer Price Index (CPI) report. Economists predict a headline CPI of 3.4% and a core CPI of 3.5%, figures significantly above the Federal Reserve’s 2% long-term target, indicating that rate cuts are unlikely in the near term.

Notable Bitcoin ETF Outflows

Recent data from the analytics platform Sosovalue shows that Bitcoin spot U.S. ETFs have experienced outflows amounting to $65 million, marking the first such occurrence in 19 trading days. This trend counters the significant inflows seen just earlier this month. Similarly, Grayscale’s GBTC ETF has reported a substantial outflow of nearly $40 million in the last 24 hours, continuing a three-day streak of significant withdrawals totaling over $36 million.

Negative Correlation Between Bitcoin and U.S. Bond Yields

A Bloomberg report highlights a severe negative correlation between Bitcoin and U.S. bond yields, reaching its worst in 14 years. The 30-day correlation between Bitcoin and the 10-year U.S. Treasury yield has plummeted to -53. This inverse relationship suggests that as bond yields rise, Bitcoin’s appeal as an investment wanes, likely influencing institutional and retail investors alike.

Bitcoin’s Circulation Pattern Reflects “Digital Gold” Trend

According to CryptoQuant CEO Ki Young Ju, Bitcoin’s current usage trends signify its treatment more as “digital gold” than as a daily transaction medium. This perspective finds support in the historical lows of Bitcoin’s circulation rate, a scenario reminiscent of early adoption phases. Ju argues that including Layer-2 transactions could have shown a higher transaction velocity, but even without that, Bitcoin’s transaction speed echoes its use as a store of value rather than a currency.

Wider Market Trends Amid Bitcoin’s Decline

The cryptocurrency market has generally been in decline, with overall market capitalization dropping by 2.8% over the last 24 hours. Most major assets have seen their prices fall between 2% and 13%. Derivatives traders were hit hard, with $168 million liquidated in the past day, mostly from long positions. Bitcoin and Ethereum contributed significantly to this liquidation, with each accounting for approximately $49 million of the losses.

Resilient Tokens in a Bear Market

Despite the downturn, not all assets have suffered. Tokens such as Injective and Akash Network bucked the trend, registering price increases of 9.5% and 1.5%, respectively, according to data from CoinGecko. These tokens illustrate that certain projects can thrive even when the broader market is under pressure, often due to unique fundamentals or significant development milestones.

Conclusion

As the crypto market navigates through turbulent times, tomorrow’s FOMC meeting and CPI report will be pivotal in shaping near-term investor sentiment. Bitcoin’s continued negative correlation with U.S. bond yields and its evolving role as a store of value suggest complex dynamics at play. Investors and traders alike should stay informed and prepared for potential market shifts as economic indicators unfold.