Bitcoin Prices Approach $65,000 To Reach Lowest Since Mid-May

Bitcoin prices retreated today, falling to their lowest in nearly a month as various factors combined to fuel their latest declines.

The world’s most prominent digital currency dropped to $65,005 this afternoon, according to Coinbase data sourced from TradingView. At this point, the cryptocurrency was trading at the least since roughly mid-May.

When asked to explain these latest price developments, analysts highlighted several factors, ranging from the recent decisions of the Federal Open Market Committee to developments in the futures markets.

The Fed’s Potential ‘Policy Mistake’

The FOMC may have erred earlier this week when it opted to leave the target range for the federal funds rate unchanged and forecasted it would reduce this rate only once in 2024, according to one market observer.

“There’s a strong emerging narrative of ‘did the Fed just make a policy mistake’ as on Wednesday they held rates at recent highs and dialed back projections for cuts for the rest of the year, just as a bunch of inflation and economic growth indicators came to light,” Seth Ginns, managing partner and head of liquid investments at CoinFund, stated via emailed comments.

Independent analyst Armando Aguilar also weighed in on this matter, elaborating on how this affected the sentiment surrounding bitcoin and the broader digital currency markets.

“The FED leaving rates unchanged between 5.25-5.50% and forecasting fewer rate cuts this year dampened the hopes of BTC rising towards new ATH levels,” he said through email.

“Instead, heightened fears of high interest rates contributed to less capital flows into crypto investment products,” Aguilar added.

“Going from three rate cuts to potentially only one, traders priced out expectations on expected rate cuts which weigh on assets such as crypto.”

FOMC Impact On Real Yields

Ginns elaborated on how the Fed’s recent decisions could impact real yields, which are yields adjusted for inflation.

“Bitcoin has a strong inverse correlation with real yields,” he emphasized.

“So if the Fed holds rates and inflation is decelerating, then real yields are moving higher, which is bad for bitcoin,” Ginns pointed out.

“The Fed has been pretty clear that they don’t want real yields to rise, so we’d expect them to become more dovish in public appearances in the coming weeks if we see continued datapoints about weaker inflation.”

Crypto Futures Market

Several analysts commented on how recent shifts in futures positions affected both bitcoin and the overall crypto markets.

“Open interest data in crypto exchanges shows a large build up of long positions post ETH Spot ETF approval,” Julio Moreno, head of research for CryptoQuant, said via Telegram.

However, “a few days ago prices started to decline because of profit taking and then an influx of new short positions fueled today’s drop.”

Greg Magadini, director of derivatives for digital asset data provider Amberdata, also offered his two cents on the matter.

“Post ETH ETF positive sentiment we saw a big buildup in crypto futures open interest, but since then the macro environment has become more hawkish due to strong jobs and the recent FOMC rate decision and press conference,” he stated via email.

“The market is now looking for only one rate cut in 2024. This combined with the realization that recent Bitcoin ETF inflows may be due to ‘basis trades’ instead of outright Bitcoin investments, we’re seeing headwinds for higher prices,” said Magadini.

He elaborated, indicating via Telegram that “the macro environment has turned hawkish and people who bought futures on the SEC ETF decision are now stuck as sellers.”

“Also the inflows into the BTC etf aren’t as directly bullish as first assumed, since it seems a lot of these inflows are paired against short CME futures,” Magadini added.

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and SOL.