On Wednesday, the price of Bitcoin experienced a slight uptick, maintaining a trading range that has been established over the past month. This comes as risk sentiment remains delicate, influenced by the anticipation of prolonged U.S. interest rates at higher levels.
The recent strength observed in the dollar has exerted pressure on crypto markets, particularly as robust U.S. inflation and retail sales data have provided little incentive for the Federal Reserve to consider reducing interest rates. Federal Reserve Chair Jerome Powell reiterated this sentiment on Tuesday, reinforcing the notion of a status quo regarding interest rates.
Amid ongoing geopolitical tensions in the Middle East, investor risk appetite has remained subdued, prompting many traders to adopt a cautious stance. Concurrently, the demand for safe-haven assets has bolstered the dollar to its highest level in over five months.
Bitcoin registered a 2.9% increase over the past 24 hours, reaching $64,269.5 by 01:15 ET (05:15 GMT). Despite this modest gain, the cryptocurrency has remained confined within a range of $60,000 to $70,000 for the past month, following its record high above $73,000 in March.
Attention has now turned to the imminent halving event, anticipated to occur in the coming days upon the generation of block no. 840,000 on the Bitcoin blockchain. This event, which will halve the rate of new Bitcoin issuance, is expected to reinforce the narrative surrounding the token’s scarcity and subsequent value appreciation.
While traders anticipate the halving to potentially drive gains in Bitcoin, historical precedent suggests that past halvings have yielded limited immediate returns.
Powell’s endorsement of prolonged higher interest rates, citing persistent inflation, has further dampened expectations for a near-term interest rate cut. Market sentiment has shifted dramatically, with the probability of a 25 basis point rate cut in June now standing at less than 18%, according to the CME Fedwatch tool. This marks a significant departure from earlier expectations for a June rate cut.
The prospect of higher-for-longer interest rates poses challenges for crypto markets, which typically thrive in environments characterized by low interest rates and ample liquidity.
While broader cryptocurrency prices witnessed a rise on Wednesday, with Ethereum climbing 2.8% to $3,110.40 and Solana gaining 7%, sentiment remained subdued. XRP traded sideways, with all three tokens still grappling with recent losses amidst the backdrop of firm U.S. interest rates and geopolitical uncertainty surrounding Iran and Israel.
