- Bitcoin has plunged more than 50% from its October 2023 peak of $126,000, recently trading near $60,000 as analysts warn of a potential crash.
- Traders are bracing for key U.S. inflation data, which could reinforce expectations for higher interest rates and further pressure the cryptocurrency.
- Record net outflows exceeding $6 billion from spot bitcoin ETFs are seen as a sustained period of institutional de-risking, capping any potential price rallies.
- The market faces additional pressure from geopolitical tensions, including the U.S. war in Iran shutting the crucial Strait of Hormuz oil shipping lane.
The Bitcoin Price has crashed this year, falling sharply toward $60,000 this week as traders and Wall Street analysts fear a significant downturn could be imminent. This plunge represents a drop of over 50% from the cryptocurrency’s peak of $126,000 per bitcoin in October last year, even as some eye a potential game-changer involving Elon Musk‘s companies.
Now, the market is braced for the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index. On Thursday, core PCE is expected to show a 3.4% year-over-year increase for May, well above the Fed’s 2% target, according to reports. Consequently, traders have ratcheted up bets on higher interest rates, with a near-70% chance of a September hike according to the CME FedWatch Tool.
“In a thin book, this week’s catalysts could hit harder,” said Nexo analyst Dessislava Ianeva, pointing to pressure on energy markets from the U.S. war in Iran. She added that “a hawkish PCE surprise reinforces the post-FOMC dollar bid, the most consistent headwind for bitcoin.” Meanwhile, Kudo‘s Konstantinos Chrysikos noted that persistent inflation would create “an even less favourable environment for non-yielding assets such as bitcoin.”
However, while many focus on the Fed, others argue bitcoin’s biggest driver is exchange-traded fund (ETF) flows. “The primary narrative for traders this week, however, isn’t the Fed; it’s the ETF tape,” said TX cofounder Mike McCluskey. He highlighted a record 30-day net outflow exceeding $6 billion across the spot bitcoin ETF complex, calling it a “sustained period of institutional de-risking.”
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