(Bloomberg) — Bitcoin sank amid cooling demand for dedicated US exchange-traded funds and ebbing bets on looser Federal Reserve monetary policy.
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The digital asset fell as much as 5.3% before paring some of the drop to change hands at $66,920 as of 7:15 a.m. Tuesday in London. Tokens earlier favored by the meme crowd such as Pepe and dogwifhat also slumped, consigning a gauge of smaller digital assets to its biggest two-day slide in about two weeks.
This year’s steep crypto rally is losing steam as lingering US price pressures lead investors to curb wagers on Fed interest-rate cuts, bolstering Treasury yields and the dollar. That’s a more difficult backdrop for speculative corners of global markets such as the digital-asset sector.
The changed views about the Fed are having an impact “across crypto, where there has been a selloff as the week gets underway — no sector is unaffected, especially those where prices have outperformed Bitcoin over last six months, for example memes,” said Stefan von Haenisch, head of trading at OSL SG Pte.
Bitcoin has shed about 10% since hitting a peak of $73,798 in mid-March. A flood of daily inflows into US spot-Bitcoin ETFs has eased, weighing on the largest digital asset. On Monday, investors pulled a net $86 million from the batch of 10 products, which have attracted about $12 billion since going live on Jan. 11, according to data compiled by Bloomberg.
The crypto market looked “weak” over the past 12 hours in the wake of the latest US economic data, said Richard Galvin, co-founder of DACM.
The figures showed that US manufacturing unexpectedly expanded for the first time since September 2022 and that input costs climbed. Following the report, the amount of Fed easing priced into swap contracts for this year slid to around 65 basis points — less than forecast by policymakers.
The supply of new Bitcoin tokens is set to halve this month, a four-yearly event some traders view as a prop for the cryptocurrency. Others argue further gains will be hard to come by given the token has quadrupled since the start of 2023.
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