In London on May 1, Bitcoin experienced a nearly 6% decline, marking its poorest monthly performance since late 2022. This downturn was driven by investors withdrawing from cryptocurrencies in anticipation of the Federal Reserve's interest rate decision. April witnessed a significant drop of almost 16% in Bitcoin's value, as investors capitalized on previous gains from a remarkable rally that saw prices soaring above $70,000. Bitcoin plummeted by up to 5.6%, reaching its lowest point since late February and settling at $57,001, while Ether also dipped by 3.6% to $2,857, hitting its lowest level since February.
The current price of Bitcoin stands 22% below its March record of $73,803, technically signaling a bear market. However, it's still showing a 35% increase compared to the beginning of the year and doubled its value from this time last year, largely due to substantial investments in newly introduced exchange-traded funds (ETFs) since January. Matteo Greco, a research analyst at Fineqia, attributed the recent decline to profit-taking by investors who entered during the downturns of 2022 and 2023, as well as ETF investors who witnessed significant price appreciation since entering the market in early 2024.
Consequently, U.S. premarket trading saw a decline in crypto-related stocks, with shares of Coinbase dropping by 4.6%, and mining companies Riot and Marathon Digital falling by 4.2-4.3%. On the macroeconomic front, while the Federal Open Market Committee (FOMC) is not expected to adjust interest rates, there's a growing sentiment among investors that the central bank may not cut rates at all this year. This perception adversely affects interest rate-sensitive assets like cryptocurrencies, emerging market stocks, bonds, and commodities.
Investor response reflects this apprehension, with the ten largest U.S. spot Bitcoin ETFs experiencing their most significant weekly outflow since their launch in January. Outflows this week amount to $496 million, primarily as flows into BlackRock's iShares Bitcoin Trust slow down. Even smaller altcoins, which sometimes benefit from weaknesses in major tokens, have suffered losses. Solana's SOL token, along with meme coins Dogecoin and Shiba Inu, have all lost around a quarter of their value over the past week.
Despite the recent "halving event" for Bitcoin in the prior month, which involves a change in the cryptocurrency's technology aimed at reducing the rate of new Bitcoin creation, prices have continued to decline, dropping by approximately 15% since April 20. Many investors anticipated a market boost before the event but were disappointed by the outcome.
Alex Kuptsikevich, a senior market analyst for the FXPro platform, noted that the decline in Bitcoin is entering a new phase. May traditionally represents a period of weakness for Bitcoin, with attention now drawn to price levels around $55,700 and $51,000-52,000. However, Kuptsikevich highlights that both the FOMC announcements and monthly jobs data could either accelerate or reverse the current downtrend.