As stocks rally ahead of the Federal Reserve’s interest rate decision this week, crypto markets seem to tell a different story. The lackluster response of bitcoin (BTC) is fueling a wave of negative sentiment among investors. The Federal Reserve’s Federal Open Markets Committee (FOMC) meeting is set to start on Tuesday morning and conclude on Wednesday afternoon, which will significantly impact the market.
Investors are betting that the Fed will raise rates once more, perhaps in July. Analysts say the odds of an imminent hike dropped sharply after the release of disappointing US weekly jobless claims data last Thursday. The highly anticipated May US Consumer Price Index (CPI) report, expected to show a notable decrease in inflation, will play a crucial role in the Fed’s decision-making.
Giles Coghlan, chief market analyst consulting for global forex broker HYCM, said that Tuesday’s inflation data could significantly move bitcoin in the next few days. If the expected inflation cooling occurs, we could see the USD dip, which should translate into temporary upside for bitcoin.
However, regulatory lawsuits cast a shadow over major players like Binance and Coinbase, impacting bitcoin’s trading price. Amid the industry’s uphill battle and the central bank’s tightening policy, bitcoin’s trading price stood at just over $26,000 as of Tuesday.
Glassnode noted that a total of $4 billion was withdrawn from Coinbase and Binance over the course of the week. “Crypto traders, spooked by SEC lawsuits, are withdrawing assets from exchanges en masse,” said Alex Kuptsikevich, a senior market analyst at FxPro.
Bitcoin miners face tightening profit margins, compelling them to sell freshly mined inventory due to the tightening profit margins witnessed in the past few weeks. Markus Thielen, Matrixport’s head of research, added that legal conflicts with the SEC continue to cast a shadow over the market, causing a liquidity crunch and panic-selling in altcoins.
On another hand, investor sentiment towards bitcoin has plummeted to levels not seen since the March 2020 crypto market crash during the COVID-19 outbreak. Anthony Sassano, founder of the Daily Gwei, suggested that the next 12 months would witness a flurry of crypto projects collapsing.
In summary, while the Fed’s upcoming interest rate decision will undeniably impact the crypto market, ongoing regulatory challenges and lawsuits weigh heavily on investor sentiment. As a result, the future of numerous crypto projects hangs in the balance as negative sentiment plagues the market despite the stock market rally.
Source: Blockworks
