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Bitcoin’s Future at Stake: Investors Anticipate CPI Data and FOMC Rate Hike

In the Brief:

  • Bitcoin dips below $26,000 after briefly hitting that mark
  • SEC lawsuits against major crypto exchanges contribute to the drop
  • Investors are awaiting the release of the May Consumer Price Index and the Federal Reserve's interest rate decision
  • Other cryptocurrencies experience losses
  • Gold also falls slightly
  • The current regulatory climate is causing uncertainty for investors

3 - 5 minute read

Bitcoin’s value has returned to familiar territory below $26,000 after briefly surfacing above this threshold. The largest cryptocurrency by market capitalization is currently trading at $25,850, down 1% in the past 24 hours. Last week, BTC dipped to $26,000, which coincided with Security and Exchange (SEC) lawsuits against crypto exchange giants Binance and Coinbase, as well as ongoing uncertainty about the U.S. central bank’s inflation-fighting monetary policy. The release of the May Consumer Price Index (CPI) on Tuesday and the Federal Reserve’s interest rate decision a day later will be scrutinized by investors.

According to Edward Moya, senior market analyst at foreign exchange market maker Oanda, the crypto market is stuck in limbo as regulatory fears run rampant, and some investors have abandoned key exchanges. Moya also noted that bitcoin has key support at the $25,400 region ahead of the CPI report and Fed decision.

Ether, the second-largest cryptocurrency by market capitalization, was recently trading at about $1,735, down 1.8% from Sunday, swept up in a larger market downturn that saw major tokens mentioned in the SEC suits. SOL, the token of the Solana blockchain, fell nearly 7%, while MATIC and ADA, the native cryptos of the Polygon and Cardana smart contracts platforms, dropped about 2.8% and 1.5%, respectively.

The CoinDesk Ethereum Trend Indicator also ticked into downtrend territory, a week after rising into the significant upturn category, which suggests sagging investor sentiment. Despite this, cryptos’ path again veered from major U.S. equity indexes, which rose buoyed by a recent surge in large tech stocks. The S&P 500, which has a large technology component, climbed 0.9% to reach its highest level in a year. The tech-heavy Nasdaq and Dow Jones Industrial Average (DJIA) jumped 1.5% and 0.5%, respectively. The yield on the 10-year Treasury ticked up to 3.73%, while gold, which has often traded similarly to digital assets as a safe haven asset, fell 0.2%.

According to Strahinja Savic, head of data and analytics at Toronto-based crypto platform FRNT Financial, the coins caught up in last week’s SEC actions are underperforming. However, he added that Ripple’s XRP token lost significant ground in 2020 before rallying strongly months later, and its market cap is now roughly where it was just before the SEC sued Ripple. Savic optimistically wrote that we’ll see if the assets named in the SEC’s lawsuits will show similar resilience amid the regulatory complexity coming from these (Binance, Coinbase) cases.

In summary, the crypto market is experiencing regulatory fears, and investors are cautious ahead of the release of the May Consumer Price Index and Federal Reserve’s interest rate decision. Bitcoin has key support at the $25,400 region, and other major cryptocurrencies like Ether, SOL, MATIC, and ADA are also experiencing a downturn. Despite this, major U.S. equity indexes are surging, buoyed by a recent surge in large tech stocks. The regulatory complexity from the SEC lawsuits against Binance and Coinbase is creating uncertainty, but there is still optimism that the assets named in the lawsuits will show resilience in the coming months.

The Bottom Line

Investors should keep a close eye on the regulatory developments coming from the SEC lawsuits against Binance and Coinbase. The crypto market is experiencing a downturn, and it remains to be seen how the assets named in these lawsuits will perform in the coming months. Bitcoin has key support at the $25,400 region, and traders should remain cautious ahead of the release of the May Consumer Price Index and Federal Reserve’s interest rate decision.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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