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Bitcoin (BTC) continues its downtrend today as crypto investors digest the results of the latest meeting of the Federal Open Market Committee, or FOMC. After the Fed kept interest rates steady at the June meeting, many lost hope for significant rate cuts before the end of the year, sending crypto down.
Although bitcoin is still up more than 45%, the world’s oldest cryptocurrency has fallen more than 5% in the past 24 hours. That means bitcoin — which peaked above $73,000 in March — is back to $61,000.
Ethereum (ETH), the world’s leading altcoin, has also fallen more than 5% in the past 24 hours, bringing ETH’s price back to around $3,300. Bitcoin’s price drop has affected almost the entire cryptosphere.
Other leading altcoins are also down. Solana (SOL) and BNB Coin (BNB) are each down 3%. Cardano (ADA) fell more than 2%, while XRP (XRP) fell 1%.
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Why is Bitcoin down today?
Bitcoin began its latest descent after the June FOMC meeting. The Fed kept the federal funds rate steady, killing any hope of a rate cut in the first half of the year and spooking some crypto investors.
Lower interest rates tend to allow cash to flow into more speculative assets such as cryptocurrency, increasing the value of those assets.
Bitcoin’s price decline today is a continuation of that trend that began after the June FOMC meeting. Over the past two weeks, outflows from crypto exchange-traded funds, or ETFs, have reached $1.2 billion. Bitcoin has fallen by more than 6% in the past week.
As the crypto industry weighs the Fed’s latest interest rate decision, it’s also anxiously awaiting another key benchmark. The May personal consumption expenditures, or PCE, price index is due this Friday. It is the Fed’s preferred inflation gauge and can therefore have a significant impact on markets.
The crypto market is typically nervous ahead of the PCE release, and investors will be looking for a positive sign that inflation is under control and that a rate cut could be coming at the next FOMC meeting.
While this recent bitcoin drop is unlikely to have a major effect on the cryptocurrency’s overall price trajectory, any negative news from the PCE report could hamper bitcoin’s recent strong performance in the near term.
Bitcoin has been in a bull market since November
Bitcoin has been on a huge run since last November. It climbed from $34,000 at the end of October to more than $73,000 in March.
After the US Securities and Exchange Commission approved 11 new spot bitcoin exchange-traded funds on January 10, bitcoin has been on an upward trend, gaining more than 50% this year alone.
ETFs, like mutual funds, are baskets of securities that investors can trade as a single investment. However, unlike mutual funds, ETFs are traded on stock exchanges throughout the market day.
Cryptocurrencies themselves trade 24/7 because unlike stocks and commodities, the crypto market is not a regulated exchange. This takes place over a decentralized network of computers.
Bitcoin ETFs – whether spot or focused on futures – trade only during market hours.
A spot ETF differs from a futures ETF in that a spot ETF tracks the current price of the underlying asset, while a futures ETF tracks potential future prices of the underlying asset.
Futures ETFs deal with the trading of futures contracts, which are complex derivative products best suited for direct trading only by experienced investors.
Is Cryptocurrency a safe investment?
Cryptocurrency markets saw a tremendous resurgence in 2023, with Bitcoin ending the year up 156%. According to many investors’ opinions, this recovery put an end to 2022’s crypto winter, which was exemplified by the rapid collapse of crypto exchange FTX in November 2022.
As a result of FTX’s collapse and other circumstances, US regulators have cracked down on exchanges and other companies that trade in and create cryptocurrencies.
SEC Chairman Gary Gensler has said in the past that his agency believes most cryptocurrencies are in fact securities and therefore fall under the purview of a plethora of pre-existing rules and legal precedents.
This claim was further asserted in filings by the SEC against a handful of crypto exchanges and companies — including Binance and Coinbase — alleging that those entities are engaged in the unlicensed sale and transfer of securities.
However, Gensler and the SEC also stated that bitcoin itself is likely a commodity — not a security — and should be regulated by the CFTC, not the SEC.
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
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