Bitcoin experienced a significant price drop on Tuesday, falling nearly 5% to lows of $66,018 on Coinbase. This decline erased gains made when Bitcoin reached highs of $71,974 last Friday. Data from CoinGecko indicates that Bitcoin traded down nearly 5% in 24 hours, and its weekly performance also showed a 6% decline at the time of writing.
Reasons Behind the Decline
The downturn followed a period where spot Bitcoin ETFs saw a 19-day streak of net inflows come to an end on Monday, with the sector recording outflows of approximately $65 million.
A Bitcoin wallet that had been inactive for over five years suddenly became active, transferring 8,000 BTC (valued at over $535 million) to several addresses, including Binance. This wallet initially received the 8,000 BTC on December 6, 2018, when Bitcoin’s price was $3,810.
The market’s risk-off sentiment is primarily driven by anticipation of the upcoming Consumer Price Index (CPI) report and the Federal Open Market Committee (FOMC) meeting. Investors are closely monitoring these events, with Fed Chair Jerome Powell’s commentary being a critical focal point.
Macroeconomic Context
FOMC meeting is expected to reveal the Dot Plot, which indicates how many interest rate cuts the Fed anticipates for the remainder of 2024. According to analysts at QCP Capital, markets are in a risk-off mode ahead of the CPI and FOMC. The FOMC’s decisions are highly influential on market behavior.
Despite the current bearish conditions, some analysts believe this downturn could be temporary. Historical patterns suggest that Bitcoin often rebounds after FOMC meetings.
Bitcoin’s recent slump to $66K reflects a broader market cautiousness ahead of crucial economic reports and the FOMC meeting. While short-term bearish trends are evident, historical data and analyst insights provide a basis for potential recovery post-FOMC, indicating that this dip might be a precursor to a bullish reversal. Investors remain watchful of macroeconomic indicators that will shape Bitcoin’s immediate future.
