On Wednesday, Bitcoin experienced a retreat as traders awaited key U.S. inflation data, leading to a cautious stance towards highly speculative, risk-heavy assets.
Market sentiment appeared to favor safe havens such as the dollar and gold, with the latter hitting a record high earlier in the week. Bitcoin, on the other hand, declined by 2.4% over the past 24 hours to reach $69,373.7 by 01:51 ET (05:51 GMT), tracking the weakness observed in most other risk-driven assets.
The surge in commodity prices, particularly in oil and metals, diverted attention away from the cryptocurrency, as market participants bet on improved global economic conditions in the coming months supporting commodity demand.
Currently, the focus is on the U.S. consumer price index data scheduled for later on Wednesday, with expectations of continued inflationary pressures through March. This trend reduces the impetus for the Federal Reserve to initiate interest rate cuts, a scenario that may not favor speculative assets like Bitcoin, which tend to perform well in a low-rate, high-liquidity environment.
The downward pressure on Bitcoin spilled over into other cryptocurrencies, with Ethereum falling by 4.2%, while XRP and Solana declined by 1.1% and 3.6%, respectively.
In addition to the inflation data, investors are awaiting the release of the minutes from the Fed’s March meeting. Despite signaling a potential rate cut of 75 basis points, several officials questioned this outlook post-meeting, particularly in light of persistent inflationary pressures.
Nevertheless, losses in the cryptocurrency market were contained as investors anticipate the upcoming halving event around April 20. This event, occurring with the generation of block no. 840,000 on the Bitcoin blockchain, will halve the rate at which new Bitcoin is mined. It is expected to reinforce the narrative of Bitcoin’s relative scarcity, potentially driving up its price.
Bitcoin had previously surged to a record high of over $73,000 earlier in 2023, largely driven by increased capital flows following the U.S. approval of spot exchange-traded funds. However, recent data indicates a slowdown in these capital flows, prompting questions about the sustainability of Bitcoin’s momentum.