Bitcoin sell signals escalate as investors fear US interest rate hikes
Bitcoin is trading flat ahead of this week’s US Federal Reserve meeting on interest rates, with market data signaling investors are ready to sell if macroeconomic conditions worsen.
The price of the world’s largest digital asset (BTC-USD) by market capitalization has fallen from the psychologically important level of $30,000 (£23,960) in late April to $28,600, at the time of writing.
According to data from Coingecko, the global cryptocurrency market cap today is $1.23tn (£0.98tn), up 1.7% in the last 24 hours. However, recent increases in the supply of bitcoin to exchanges suggest that potential sales are approaching.
Read more: Crypto live prices
Since the beginning of May, more than 5,000 bitcoins have been transferred to exchanges, with reserves of the digital asset across all cryptocurrency exchanges increasing consistently since April 4, according to data from CryptoQuant.
The increased supply of bitcoin on exchanges suggests that investors are ready to sell if the Fed’s expected increase in the benchmark interest rate pushes the US economy towards recession.
If bitcoin maintains its pattern of marching in lockstep with the stock markets, which would be adversely affected by a higher interest rate, BTC holders may sell in favor of US Treasuries.
Federal Reserve interest rate meeting
On Wednesday, the US central bank is expected to raise interest rates by 25 basis points for the third time in a row.
While headline annual consumer inflation fell in March, core inflation rose, leaving economists divided on the Fed’s course of action.
The Fed is expected to weigh its decisions carefully due to the recent credit crunch and bank failures in the US banking sector.
Read more: Philip Hammond warns of “real risk” to London’s financial services from the EU’s crypto bill
Although inflation has fallen to 5%, there are macroeconomic stresses that could reverse the recent cooling, such as OPEC oil production cuts and increased energy demand from China.
Standard Chartered analyst predicts bitcoin to rise by $20,000 if US defaults on debt obligations
Geoff Kendrick, head of currency research at Standard Chartered, has predicted that if the US defaults on its debt obligations, the price of bitcoin could rise by $20,000, while other cryptocurrencies such as Ethereum could fall.
Although he considers a US debt default a “low probability, high impact event”, bitcoin’s reputation as a safe haven and its historical performance during market downturns support his prediction.
Previously, Kendrick predicted that bitcoin will exceed $100,000 by the end of 2024, driven by factors such as banking turmoil in the United States, the bitcoin halving event, and subsequent interest rate hikes by the Federal Reserve.
See: Philip Hammond warns of ‘real risk’ to London’s financial services from EU crypto bill | Crypto Mile
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