Bitcoin has fallen sharply to around $57,300, as investor sentiment shifts ahead of a US Federal Reserve announcement on interest rates expected later on Wednesday (May 1).
This steep decline marks Bitcoin’s lowest price point since February and a decline of around 22% since it hit an all-time high on March 14 of $73,000
The Fed is expected to publish a policy decision at 2 PM ET this afternoon which will give an update on US interest rates. The market is wary of predictions that the Fed will keep rates higher for a longer period and not lower them. The recent price volatility suggest Bitcoin traders are preparing for this announcement.
Why is the Bitcoin price falling?
According to a CryptoQuant report shared with BeInCrypto, the downturn is primarily fueled by a dramatic reduction in demand from permanent holders as well as large investors known as ‘whales’. Permanent holders have slashed their monthly growth by 50%, from over 200,000 BTC in late March to just 96,000 BTC. Whale have halved their demand growth rate from 12% in March to 6%.
Matteo Greco, a Research Analyst at Fineqia International, suggests that increased selling pressure from long-term holders often signals a broader market anticipation of a downturn. “When there’s a significant increase in selling pressure from long-term holders, it typically indicates that most ‘relevant’ market participants anticipate a sell-off,” Greco told BeInCrypto.
The decrease in demand is further evident in the sharp reduction of Bitcoin purchases from spot exchange-traded funds (ETFs) in the United States. After peaking in mid-March with daily purchases exceeding $1 billion, the current buying rate from these ETFs has fallen significantly. BlackRock’s iShares Bitcoin Trust (IBIT) even experienced its first day without any inflows since the introduction of Bitcoin (BTC) exchange-traded funds on April 25.
Pushing down the price further is an increase in Bitcoin selling by miners. Daily sales by miners in April have risen noticeably, reaching the highest levels since early January. This selling activity often indicates Bitcoin miners’ need to cover operational costs or take profits, which can exacerbate downward price movements.
Even though the Bitcoin halving in April usually leads to a price increase because fewer new coins are created, the price has continued to fall. After the halving, Bitcoin’s value dropped another 15%, showing that this expected event wasn’t enough to overcome the bigger economic factors putting pressure on the market.
Featured image: Ideogram
