Bitcoin (BTC) sinks to $57,000 ahead of Fed decision

Bitcoin on Wednesday slid to its lowest level in over two months amid broader risk-off sentiment in markets, as investors kept an eye on the U.S. Federal Reserve’s upcoming interest rate decision.

The cryptocurrency dropped as much as 7% to $56,526.00, its lowest level since Feb. 27, according to CoinMetrics. It was last lower by about 4% at $57,413.94.

Investors are eyeing the upcoming interest rate decision from the Federal Reserve, which will conclude its two-day policy meeting on Wednesday afternoon. The central bank is widely expected to hold interest rates steady, according to fed funds futures pricing data. Investors are looking for clues from Fed Chair Jerome Powell on what needs to happen before rates can come down. 

Geoff Kendrick, Standard Chartered’s head of digital asset research, said in a note out on Wednesday that bitcoin’s drop below $60,000 “has now re-opened a route to the 50-52k range.”

“The driver seems to be a combination of crypto specific and broader macro,” Kendrick said.

He noted the primary factors impacting the token were five days of consecutive outflows from the U.S. spot bitcoin exchange-traded funds, as well as a deterioration in the macro backdrop and worsening market liquidity.

Kendrick added that the reaction to the launch of spot bitcoin ETFs in Hong Kong earlier this week was “poor,” focusing on small first-day turnover volume from the ETFs in the millions of dollars, despite the net asset positions of the ETFs being solid.

“Of course liquidity matters when it matters, but with a backdrop of strong US inflation data and less likelihood of Fed rate cuts it matters at the moment,” Kendrick said in the note.

The downward price action in crypto markets also comes a day after the former CEO of Binance, Changpeng Zhao, was sentenced to four months in prison over money laundering charges.