On Wednesday, the price of Bitcoin experienced minimal movement as it grappled with the impact of a resurgent dollar, while data indicating a slowdown in capital flows hinted at investor apprehension towards cryptocurrencies.
Over the past 24 hours, Bitcoin dipped by 0.6% to reach $70,162.1 by 01:01 ET (05:01 GMT), after briefly touching $71,000 on Tuesday.
The momentum of Bitcoin was curbed by the persistent strength of the dollar, with traders showing a preference for the greenback amidst anticipation of further signals regarding U.S. interest rates. The dollar index hovered near a one-month high on Wednesday.
Recent dovish signals from central banks like the Swiss National Bank and the Bank of England have bolstered confidence in the dollar, positioning it as a high-yielding, low-risk currency until the Federal Reserve commences interest rate adjustments.
This week, attention is turned towards the Personal Consumption Expenditures (PCE) price index, the Fed’s favored inflation measure, which is anticipated to provide additional insights. Any indication of persistent inflation could influence a more hawkish stance from the Fed, potentially delaying plans for interest rate cuts.
Market participants eagerly await speeches from key Fed figures, including Chair Jerome Powell and FOMC member Mary Daly, which could offer further clarity on interest rate trajectories.
Amidst the prospect of increased U.S. interest rates, investors favored safer dollar-denominated assets over Bitcoin, particularly as the cryptocurrency typically faces pressure in high-interest rate environments. Bitcoin experienced significant losses in 2022 when interest rates surged, plummeting to around $15,000.
Despite this, Bitcoin has since staged a remarkable recovery, nearly quintupling in value from its 2022 lows and recently hitting record highs exceeding $73,000. Much of Bitcoin’s recent ascent can be attributed to the approval of exchange-traded funds (ETFs) directly tracking its price.
However, recent data from CoinShares, a digital asset manager, revealed a slowdown in capital inflows into Bitcoin ETFs in recent weeks. Moreover, ongoing outflows from the Grayscale Bitcoin Trust (GBTC) ETF exerted downward pressure on the cryptocurrency.
While Bitcoin ETFs experienced seven consecutive weeks of substantial inflows following the approval of spot ETFs, these inflows tapered off in the past week amid growing investor unease surrounding U.S. interest rate uncertainty.
