Bitcoin Tumbles Amid Reduced US ETF Interest and Fed Policy Expectations

Cryptocurrency markets experienced a downturn as Bitcoin's value plummeted, primarily due to waning enthusiasm for dedicated U.S. exchange-traded funds (ETFs) and a recalibration of expectations for the Federal Reserve's monetary policy. Bitcoin's valuation took a substantial hit, seeing a drop of up to 5.3% in Singapore on Tuesday morning, where it then somewhat recovered to a trading price of $66,849 at 11:41 a.m.

In more nuanced detail, the digital asset's fluctuation is in part reflection of investors' response to continued price pressures in the United States, which led to reevaluation of earlier bets on the Fed's interest rate cuts. This has correspondingly pushed up Treasury yields and strengthened the dollar, creating a challenging environment for speculative markets, specifically digital assets.

Stefan von Haenisch, the head of trading at OSL SG Pte, highlighted the universal ramifications on the crypto sector, with widespread sell-offs kickstarting the week. Small-cap tokens, previously buoyed by social media trends, like Pepe and dogwifhat, have particularly felt the strain, seeing significant declines and dragging a smaller crypto asset index to a major bi-weekly loss.

Since reaching a high watermark of $73,798 in mid-March, Bitcoin has retracted roughly 10% of its value. The cooling of daily inflows into U.S. spot-bitcoin ETFs has played a role in this retreat, with potential net outflows recorded on Monday as compiled by Bloomberg data.

Further compounding the weak crypto market sentiment was the reaction to unexpected expansions in U.S. manufacturing and increased input costs, as noted by Richard Galvin of DACM, following the latest economic data from the U.S. This has led to a decrease in the pricing-in of Fed easing measures within swap contracts, aligning closer with policymakers' projections.

In the midst of skepticism, attention turns to the significant event of Bitcoin's supply halving occurring this month, an occurrence every four years which some traders believe could bolster the cryptocurrency's value. Notwithstanding this, critics contend that potential growth is limited given Bitcoin's fourfold increase since the beginning of 2023.