Bitcoin, the world’s largest cryptocurrency, experienced a significant drop in price on Monday, falling 2.4% to $62,850.7. This decline is part of a larger trend over the past week, driven by concerns over U.S. interest rates and anticipation of key inflation data. The strong performance of the dollar, which reached a two-month high following robust U.S. purchasing managers index data, has further contributed to the downward pressure on Bitcoin and other cryptocurrencies.
While Bitcoin has seen a moderate decline, major altcoins have experienced even deeper losses. Ethereum, the second-largest token, fell 4.2% to $3,366.81, hitting a one-month low. Other altcoins, such as XRP, ADA, and SOL, also saw significant decreases in value. This trend can be attributed to a variety of factors, including token unlocks, dwindling institutional demand, and profit-taking among investors.
The upcoming release of key PCE price index data this Friday is expected to influence market sentiment further. This data, which serves as the preferred inflation gauge of the Federal Reserve, will likely impact the central bank’s decision-making regarding interest rates in the coming months. While some cooling in inflation is expected, the reading is projected to remain above the Fed’s 2% annual target, providing justification for maintaining high rates. This environment is unfavorable for cryptocurrencies, as high interest rates diminish the appeal of speculative, risk-driven assets like Bitcoin.
Recent capital flow data has indicated that institutional demand for crypto investment products remains focused primarily on Bitcoin. However, even Bitcoin has seen heavy outflows earlier in June, signaling a shift in investor sentiment. The lackluster performance of altcoins compared to Bitcoin reinforces the preference for the world’s largest cryptocurrency among institutional investors.
Overall, the decline in Bitcoin and other cryptocurrencies can be attributed to a combination of factors, including market concerns over U.S. interest rates, anticipation of key inflation data, and dwindling institutional demand. While the market outlook remains uncertain, the upcoming release of important economic data may provide further insight into the future trajectory of cryptocurrencies. Investors should remain vigilant and closely monitor developments in the market to make informed decisions regarding their crypto holdings.