Cryptocurrency prices mounted a short-lived rebound Wednesday afternoon after the Federal Reserve decided to keep interest rates unchanged, and as Chairman Jerome Powell detailed the Fed's balance sheet strategy. Bitcoin briefly spiked above $59,000 on Powell's comments before tumbling below a key level after weaker-than-expected launch of bitcoin ETFs in Hong Kong on Tuesday.
The Federal Reserve System Board of Governors on Wednesday unanimously maintained the target federal funds rate at 5.4%. It noted a "lack of further progress" toward its 2% inflation goal, according to the latest FOMC meeting minutes.
Powell said the Fed had adopted a baseline stance, prepared for inflation measures either to improve or deteriorate. He said he still expected inflation to move back down later this year, though his confidence in the forecast is lower.
Bitcoin rebounded briefly above $59,300 Wednesday afternoon, before dropping back below $56,900, around its level prior to the Fed meeting. The cryptocurrency fell as low as $56,552 Wednesday. The price of bitcoin has jumped 36% year to date, with most of the gains compounding in February and March.
Bitcoin miner Riot Platforms retreated 2.9% after a short surge. Marathon Digital shares erased their 4.7% jump. CleanSpark fell back into negative territory with a 4.6% drop.
Coinbase pared gains to 3% Wednesday after a 5.3% leap in early trade. The crypto exchange announces its first-quarter results late Thursday. Analysts polled by FactSet predict Coinbase will report earnings of $1.05 per share, swinging from a loss of 34 cents per share the year prior. They see revenue spiking nearly 76% to $1.36 billion.
Bitcoin ETF Weakness
Overseas, three spot bitcoin ETFs and three ether ETFs debuted in Hong Kong on Tuesday but failed to hit launch-day forecasts. The new Hong Kong ETFs recorded $12.8 million in trading volume during their first day, driven by $9.74 million in bitcoin ETF volume, Bloomberg analyst James Seyffart reported. However, the initial Tuesday trading volume fell short of local media estimates of over $100 million, CoinDesk reported.
The Hong Kong launch volume paled in comparison to the $4.6 billion in total volume that the 10 U.S. spot bitcoin ETFs recorded during their Jan. 11 debut. Bitcoin eased 0.6% on Jan. 11 after the U.S. launch.
Elsewhere, digital asset analytics firm 10x Research noted that bitcoin is in another 20% correction in the context of the larger bull market, begun in June. However, this correction differs from the three prior 20%+ corrections due to institutional investment in bitcoin ETFs. 10x Research estimates the average entry price paid by bitcoin ETFs is about $57,300. A drop below that level — as occurred early Wednesday — could lead to increased selling pressure.
The U.S. spot bitcoin ETFs recorded outflows totaling about $635 million over the last five trading days through Tuesday, data from U.K.-based Farside Investors shows. The Grayscale Bitcoin Trust saw the largest outflows during that period at $470.1 million.
Still, the new U.S. spot bitcoin ETFs have recorded $11.79 billion in inflows since their Jan. 11 launch.
Standard Charter on Wednesday noted that the breakdown below the $60,000 technical level could prompt a bitcoin price drop to $50,000 to $52,000, CoinDesk reported. "More than half of the spot ETF positions are under water and so the risk of liquidation of some of them must be considered as well," analyst Geoff Kendrick wrote to CoinDesk, also noting macro headwinds.
Standard Charter recommended buying bitcoin if it falls to that $50,000 to $52,000 range, or if the May 15 U.S. CPI report is "friendly."
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
