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Bitcoin Dips as Fed Maintains Rates

Bitcoin's price plunged to around $57,000, hitting a two-month low after it won't cut interest rates just yet
July 5, 2024

Bitcoin's price plunged to around $57,000 on Thursday, reaching a two-month low after the U.S. Federal Reserve released minutes from its June meeting. The central bank's stance of maintaining interest rates without imminent cuts has sent ripples through the cryptocurrency market.

By 2:30 p.m. London time, Bitcoin dropped roughly 5% in 24 hours to $56,837, dipping below the $57,000 mark for the first time since May 1, according to CoinGecko. The digital currency managed to recoup some losses, trading at $57,932.57, down 3.4% by 5:05 p.m. London time. Ether, the second-largest cryptocurrency, also faced a 5% decline, landing at $3,120.

This downturn follows the Federal Reserve's release of its June meeting minutes, which revealed officials' hesitancy to lower interest rates until there is clear evidence of inflation trending towards the central bank's 2% target. Historically, higher interest rates tend to reduce investor appetite for riskier assets like cryptocurrencies.

Bitcoin soared to an all-time high of over $73,700 in March after the U.S. Securities and Exchange Commission approved the first U.S. spot bitcoin exchange-traded fund (ETF). ETFs provide a way for investors to gain exposure to Bitcoin without directly holding the cryptocurrency, which has contributed to legitimizing the asset class and attracting institutional investors.

However, Bitcoin has since traded within a range of approximately $59,000 to $72,000. Recent pressure on Bitcoin's price has also come from the impending distribution of about $9 billion worth of coins from the collapsed exchange Mt. Gox, which could trigger significant selling.

On Thursday, small amounts of Bitcoin were moved from three wallets previously associated with Mt. Gox, the largest being just $24 worth of the cryptocurrency, according to Arkham Intelligence. The connection to the Mt. Gox repayment plan remains unclear.

Adding to the market activity, the German government sold around 3,000 bitcoins, worth roughly $175 million, seized in connection with the Movie2k piracy operation. These assets were moved to exchanges such as Kraken, Bitstamp, and Coinbase, as well as an unidentified wallet, possibly for an institutional service or over-the-counter (OTC) deposit.

Despite these fluctuations, analysts at crypto data firm CCData remain optimistic. They believe Bitcoin hasn't reached the peak of its current appreciation cycle and predict it will hit a new all-time high. Historical patterns suggest that Bitcoin's "halving" events, which reduce the supply of new bitcoins, precede periods of significant price increases lasting 12 to 18 months. The last halving took place on April 19, indicating the potential for further growth into 2025.

Bitcoin advocate Tom Lee expressed confidence on CNBC's "Squawk Box," predicting Bitcoin could reach $150,000 despite the upcoming Mt. Gox disbursement. Lee sees the resolution of this "overhang" as a catalyst for a strong rebound in the latter half of the year.

As the market navigates these dynamics, the crypto community watches closely for signs of recovery and long-term growth potential in Bitcoin's ongoing journey.

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