Bitcoin, the largest cryptocurrency by market capitalization, is trading at $63,000, down from $65,000 at the start of the week. Analysts blame the decline on the U.S. Federal Reserve striking a hawkish tone on interest rates.
On June 17, the U.S. central bank indicated that it expects to raise interest rates by 25 basis points in this year’s second half. That news effectively ended the recovery in cryptocurrencies and sent them lower. Risk assets such as crypto tend to perform best when interest rates move lower rather than higher.
Fed Watch
Over its past four consecutive meetings, the U.S. Federal Reserve has kept interest rates unchanged and maintained the Fed Funds Rate in a range of 3.50% to 3.75%. However, the Fed has now taken a hawkish turn, removing language around an easing bias and indicating that rates are likely to move higher.
News of higher interest rates comes as investor sentiment towards digital assets remains fragile. While some market observers say that Bitcoin likely bottomed earlier in June when it fell just below $60,000, others are more cautious. Bearish analysts continue to say that there are few near-term catalysts on the horizon for Bitcoin and other digital assets.
