Investing.com-- Bitcoin price fell further on Wednesday, briefly slipping below key support levels as anticipation of a Federal Reserve meeting kept traders averse to speculative assets such as cryptocurrencies.
Recent data showing sustained outflows from Bitcoin investment products, particularly exchange-traded funds (ETFs), also weighed on sentiment, while the launch of new spot crypto ETFs in Hong Kong offered little cheer.
Bitcoin fell sharply in the past 24 hours, hitting as low as $56,500 by 06:34 ET (10:35 GMT).
Fed anticipation sees traders prefer dollar over Bitcoin
Bitcoin’s losses coincided with a sharp surge in the dollar on Tuesday, which saw the greenback come close to a six-month high.
Kristian Haralampiev, Structured Products Lead at Nexo, told Investing.com that Bitcoin price is softer amid "a current risk-off statement across the board."
This trading regime has been "instigated by slow volumes from Honk Kong ETFs, typically seasonal effects of the market, and further regulatory headwinds in the U.S, all in an uncertain macroeconomic environment," he said.
Traders were largely biased towards the dollar before the conclusion of a Federal Reserve meeting on Wednesday, where the central bank is widely expected to keep rates steady.
But Chair Jerome Powell is likely to strike a hawkish chord, especially in the wake of several hotter-than-expected inflation readings.
Expectations of such a scenario saw traders steadily price out expectations of early interest rate cuts by the Fed. The central bank is now expected to begin cutting rates only by September, if at all.
Higher-for-longer U.S. interest rates bode poorly for Bitcoin and the broader crypto industry, given that the space usually thrives in a low-rate, high-liquidity environment.
This notion was also a key driver of capital outflows from crypto investment products in recent weeks, as hype over spot Bitcoin ETFs dwindled in the face of higher-for-longer rates.
"The market may feel tired and lacking a stimulant may be ready to test further bottoms in the $50,000 range," Haralampiev added.
However, this crypto expert sees this dip as a buying opportunity as he expects the world's largest digital coin "to reclaim the low $60,000 range."
Crypto price today: Altcoins track Bitcoin losses
Broader crypto prices also retreated as sentiment remained dour. World no.2 crypto Ethereum fell 5.1% to $3,009.19, while XRP and Solana lost 2.6% and 7.8%, respectively.
On the regulatory front, disgraced Binance founder Changpeng Zhao was sentenced to four months in prison after pleading guilty to violating U.S. anti-money laundering laws.
Zhao was once considered the most powerful man in crypto, and is the second major crypto CEO to be sentenced to prison after FTX’s Sam Bankman-Fried in 2023. But Zhao’s sentence was substantially milder than the 25 years received by Bankman-Fried.