On Wednesday, the price of Bitcoin experienced a slight decline, primarily influenced by the strength of the U.S. dollar as investors grew increasingly uncertain about the future path of U.S. interest rates ahead of key labor market data releases.
The world’s largest cryptocurrency dipped by 0.5% to $66,229.5 by 01:15 ET (05:15 GMT).
The broader decrease in risk appetite, exemplified by a notable drop in global stock markets, also exerted pressure on Bitcoin as investors sought refuge in safe-haven assets like the dollar and gold.
The U.S. dollar surged to a 4-½ month high this week, while gold prices reached record highs.
The decline in risk appetite, particularly evident in Asian markets following a devastating earthquake in Taiwan, kept Asian stocks in negative territory, contributing to the dollar’s resilience after recent gains.
Moreover, Bitcoin investors remained cautious amidst speculation that the U.S. government might be preparing to liquidate part of the 30.1K Bitcoins ($2.1 billion) recovered from the Silk Road marketplace. Crypto influencer ZachXBT highlighted on the social media platform X that an address linked to the U.S. government had transferred $139 million worth of Bitcoin to a Coinbase (NASDAQ:COIN) deposit address. Such a move to an exchange could potentially signal a sale of the tokens on the open market, adding downward pressure on Bitcoin. Historically, previous crypto seizures by the U.S. government have led to auctions of the seized tokens.
Bitcoin’s significant price surge earlier this year, culminating in a record high above $73,000, was primarily fueled by the U.S. approval of spot exchange-traded funds. However, recent data suggests a slowdown in capital inflows into these ETFs, which could indicate further weakness in Bitcoin prices.
Furthermore, the anticipation of sustained U.S. interest rate hikes poses additional challenges for Bitcoin, given its tendency to thrive in environments characterized by high liquidity and speculation.