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As the next Federal Reserve meeting approaches, investor pessimism has had a significant impact on the prices of Bitcoin and Ethereum.
At the time of writing, BTC has fallen by 7.6% and ETH by 6% in the last 24 hours. The price of Bitcoin is currently hovering around $57,000, while the price of Ethereum is stuck at just under $2,900, according to data from CoinGecko.
The volatility has been particularly difficult for derivatives traders, with $457 million in crypto futures positions liquidated in the past 24 hours, according to CoinGlass data. Unsurprisingly, $392 million of these liquidations were long-term contracts, where traders had bet on future price increases.
The price decline was widespread across the market, with few assets among the top 100 cryptocurrencies by market cap on CoinGecko escaping the red sea, except for stablecoins which managed to maintain their anchors, like Tether (USDT) and Circle’s USDC.
US Federal Open Markets Committee set to announce interest pricing decision at 2:00 p.m. EST today, followed by a press conference with Fed Chairman Jerome Powell at 2:30 p.m. In February, investors seemed certain that May would be the month the FOMC finally cut interest rates, which is typically a bullish sign for risky assets like Bitcoin. Declining interest rates typically encourage traders to abandon U.S. Treasuries and seek gains in riskier assets, such as stocks and crypto assets.
However, the Fed's key interest rate is currently between 5.25% and 5.5% and has been unchanged since July 2023, as the central bank aims to curb inflation. Policymakers are closely monitoring inflation, which is currently at 3.5%, hoping to bring it closer to 2% before considering rate cuts. Last month, inflation rose to its highest level since September, making the prospect of a rate cut more remote.
In March, the Swiss Central Bank announced it was cutting interest rates, giving traders some hope. However, this sentiment did not extend to other major central banks. A few months ago, traders seemed certain that the Fed might cut interest rates in June, according to the CME Fed Watch Tool. Sentiment has since deteriorated, with growing expectations that the Fed would not ease interest rates until at least the end of this year.
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