Bitcoin witnessed a slight decline on Wednesday, primarily influenced by the strength of the U.S. dollar as investors grappled with uncertainty surrounding U.S. interest rates ahead of crucial labor market data scheduled for later in the week.
The world’s largest cryptocurrency dipped by 0.5% to $66,229.5 as of 01:15 ET (05:15 GMT).
The downward pressure on Bitcoin was exacerbated by a broader decrease in risk appetite, evidenced by a sharp downturn in global stock markets. This shift prompted investors to seek refuge in traditional safe-haven assets such as the dollar and gold.
The greenback surged to a 4-½ month peak this week, while gold prices reached record highs.
Additionally, risk sentiment, particularly in Asian markets, was dampened by a severe earthquake in Taiwan, the consequences of which remained uncertain. This uncertainty led to negative trading in Asian stocks, while the dollar managed to stabilize after its recent ascent.
In another development, Bitcoin investors remained apprehensive due to the potential for a mass sale event, with reports suggesting that the U.S. government was preparing to mobilize a portion of the 30.1K Bitcoins ($2.1 billion) recovered from the Silk Road marketplace.
Crypto influencer ZachXBT highlighted on the social media platform X that an address associated with the U.S. government had transferred $139 million worth of Bitcoin to a Coinbase (NASDAQ:COIN) deposit address. Such a move onto an exchange could signal an impending sale of the tokens on the open market, adding selling pressure on Bitcoin. Historically, past crypto seizures by the U.S. government have led to the auctioning off of the seized tokens.
Bitcoin’s remarkable price surge earlier this year, culminating in a record high above $73,000, was largely attributed to the approval of spot exchange-traded funds (ETFs) in the U.S. However, recent weeks have seen a slowdown in capital inflows into these ETFs, potentially signaling further weakness in Bitcoin prices.
Moreover, the possibility of prolonged higher U.S. interest rates poses additional challenges for Bitcoin, given its tendency to thrive in environments characterized by high liquidity and speculation.
