Key Points
- Bitcoin’s struggle to recover is linked to the U.S. Federal Reserve’s decision to only cut rates once this year.
- Bitcoin miners are selling their BTC holdings to offset the reduction in block rewards.
Bitcoin’s recovery is proving to be a challenge after the U.S. Federal Reserve announced on Wednesday that it would only be making one rate cut this year.
The U.S. central bank’s decision has had a significant impact on equity markets, and Bitcoin has followed suit, dropping over the past day. The futures market also took a hit following this week’s Federal Open Market Committee meeting.
Fed’s Decision Impacts Markets
Dow Jones Industrial Average futures fell by 0.63%, and S&P 500 futures dropped by 0.33% in pre-market trading. Major European and UK equity indices were also in the red.
In London, the FTSE 100 saw a decrease of 25.56 points, falling to 8,138.11 in mid-day trading. The European Stoxx 600 index also saw a decrease, falling by 2.33 points to 513.71.
Bitcoin mirrored this downward trend, decreasing by about 1% over the past day and was valued at $66,889 at 5:46 a.m. ET.
In March, the Fed had suggested that it might reduce borrowing costs three times by the end of 2024. However, new forecasts from this week’s meeting indicated only a single reduction.
Bitcoin Miners Selling Off Holdings
Analysts at QCP Capital believe that the recent decline in Bitcoin’s price can also be attributed to miners selling their BTC holdings. This is to offset the reduction in block rewards following the Bitcoin Halving in April.
Analysts from Bitfinex have noted that as central banks globally begin to cut rates, such as the Bank of Canada and the European Central Bank, markets are anticipating a broader trend towards monetary easing.
It is likely that the Bank of England and the Federal Reserve will follow this trend in the coming months. The global liquidity cycle suggests that the money supply is likely to increase, which can support asset prices, including cryptocurrencies.