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Bitcoin experienced a slight dip in price on Wednesday, maintaining its position within a trading range established over the past month. The market sentiment continued to be delicate as U.S. interest rates remained elevated.
Recent sessions witnessed a surge in the strength of the dollar, putting pressure on crypto markets. This trend intensified with robust U.S. inflation and retail sales data, providing little incentive for the Federal Reserve to consider interest rate cuts. Federal Reserve Chair Jerome Powell reiterated this stance on Tuesday.
Amidst geopolitical tensions in the Middle East, risk appetite remained subdued, leaving traders largely on the sidelines. Safe-haven demand, coupled with rate expectations, propelled the dollar to over five-month highs.
Over the past 24 hours, Bitcoin saw a 0.6% decline to $62,703.1 by 08:03 ET (12:03 GMT). The cryptocurrency remained within the range of $60,000 to $70,000 for a month after reaching a peak above $73,000 in March.
Powell emphasized the likelihood of sustained higher interest rates due to persistent inflation, dampening expectations of rate cuts. Consequently, market sentiment reduced the probability of a 25 basis point cut in June to less than 18%, with nearly 80% foreseeing the Fed maintaining rates, according to the CME Fedwatch tool. This shift contrasts sharply with previous expectations of a June cut.
The prospect of extended higher rates poses challenges for crypto markets, traditionally thriving in a low-rate, high-liquidity environment.
Attention now turns to the impending halving event expected with the generation of block no. 840,000 on the Bitcoin blockchain. This event will halve the rate of new Bitcoin mining, reinforcing the narrative of token scarcity increasing its value. While traders anticipate some Bitcoin gains following the halving, historical data suggests limited near-term gains from past halvings.
Goldman Sachs analysts caution against placing undue reliance on historical patterns from previous halving cycles. They highlight the need to consider prevailing macroeconomic conditions, emphasizing that favorable conditions are crucial for historical trends to recur.
Altcoins also experienced declines on Wednesday, with Ethereum, the second-largest token, down 1.6% at $3,047.88. Solana and XRP witnessed declines of 0.5% and 0.6%, respectively, amidst the backdrop of higher U.S. interest rates.
Geopolitical tensions between Iran and Israel further contributed to fragile risk appetite, adding to the subdued mood across crypto markets.
