Bitcoin falls before the Fed and facing the timid beginnings of a new investment

Investors are “preparing for a stronger dollar” as a result, and therefore with better returns. This makes investing in cryptocurrencies less attractive by comparison.

Bitcoin suffered on Wednesday from expectations of a firm tone from the Federal Reserve on interest rates, which could support the dollar and turn investors away from the cryptocurrency. The mixed launch in Hong Kong of an investment product that tracks the price of bitcoin also contributed to the decline of the cryptocurrency. Expectations of maintaining rates from the American central bank, which makes its decision on Wednesday, “amplify sales” of bitcoin, explains James Harte of Tickmill.

Indeed, investors are “preparing for a stronger dollar” as a result, and therefore with better returns. This makes investing in cryptocurrencies less attractive by comparison. Around 1:25 p.m. GMT (3:25 p.m. in Paris), bitcoin fell 3.67% to $57,666, after hitting its lowest since the end of February earlier on Wednesday, at $56,527.

“Expectations of an upcoming easing by the Fed had been a key driver of the recovery” in the prices of the main cryptocurrency “at the beginning of the year,” specifies the analyst.

Unsuccessful debut of bitcoin ETFs in Hong Kong

For several months, bitcoin had also been pushed by anticipations of the arrival on the American market – finalized in January – of an index fund (ETF) indexed to bitcoin, an investment product allowing investors to benefit from evolutions of this cryptocurrency without directly owning it. The digital token recorded a historic record at $73,797 in mid-March, before falling again.

However on Wednesday, “bitcoin also suffered from the less than successful debut” of these same bitcoin ETFs in Hong Kong, launched in parallel with ETFs indexed to ether, another cryptocurrency, notes James Harte. Six funds were launched on the Hong Kong Stock Exchange on Tuesday, launched by three managers: Bosera Funds, China Asset Management (Hong Kong) Limited and Harvest Global Investments. However, “the first day of listing of the funds only recorded around $10 million in inflows”, notes the analyst, well below the issuers’ expectations.

“As demand for spot bitcoin ETFs in the United States has dried up over the past month, investors perceive the risk of a deeper decline” in this type of investment, he comments.

“Not in a situation of ‘general panic’”

“Bitcoin warns us of an upcoming drop in prices on the stock market,” said Charles Morris of ByteTree. The analyst notes in fact that this cryptocurrency “has often been correlated with risky assets, particularly technological stocks” and that it is a “leading indicator” of trends on this subject.

However, “we are not in a situation of ‘general panic’, because corrections of around 20% are normal” in the event of an upward trend in bitcoin, notes Simon Peters of eToro. Earlier this month, the halving, an event that takes place approximately every four years, also halved the bitcoin reward given to users (or “miners”) for running the digital currency. Faced with lower margins, “miners could be forced to sell a larger quota of their reserves” in bitcoins “to cover their operational expenses,” notes the analyst.