Bitcoin and Ether prices experienced slight declines on Tuesday as traders remained cautious ahead of key inflation data expected later this week. This caution particularly affected cryptocurrencies, contributing to the cooling of a recent rally in Ether.
The initial excitement over the approval of an exchange-traded fund (ETF) that directly tracks Ether has diminished. The Securities and Exchange Commission (SEC) now needs to engage with fund managers regarding their applications to list such a product. This step follows the SEC’s approval last week for major exchanges to list a spot Ether ETF, which had sparked a sharp rally in Ether and the broader crypto markets.
Despite the previous enthusiasm, Bitcoin fell by 1.3% over the past 24 hours to $67,901.9 by 01:15 ET (05:15 GMT). Ether also retreated, decreasing by 2% to $3,844.48 and moving away from the two-month highs reached over the weekend.
Concerns over sustained high U.S. interest rates remained at the forefront, particularly with the upcoming release of the Personal Consumption Expenditures (PCE) price index data. This index is the Federal Reserve’s preferred inflation gauge and will likely influence the central bank’s future interest rate decisions.
The sentiment towards cryptocurrencies and other risk-driven assets has been negatively impacted by growing fears that the Federal Reserve will maintain higher interest rates for a prolonged period. These fears were reinforced by several Federal Reserve officials warning that persistent inflation would delay any potential monetary easing.
These concerns have kept Bitcoin trading within a relatively stable range for nearly three months, limiting its potential for larger gains. Ether has similarly been constrained, despite its recent rally.
High interest rates generally do not favor speculative assets such as cryptocurrencies. Higher rates reduce the liquidity available for investment in riskier assets and increase the attractiveness of conventional, low-risk investments like the U.S. dollar and Treasuries.
On Monday, cryptocurrency prices showed little reaction to a slight decline in the dollar, indicating the market’s current sensitivity to broader economic indicators rather than short-term currency fluctuations.
In addition to the PCE data, upcoming inflation readings from other major economies, including Australia, Japan, and Germany, are expected this week. These readings will be closely monitored as they could provide further insights into global inflation trends and central bank responses.
Broader cryptocurrency prices remained relatively stagnant, with trading volumes subdued due to market holidays in the U.S. and the UK. Among altcoins, SOL and XRP saw minor increases of less than 1% each, while meme tokens like DOGE and SHIB traded within a flat-to-low range, reflecting the overall cautious sentiment in the market.
As the cryptocurrency market navigates through this period of heightened caution and regulatory scrutiny, the impending inflation data and the Federal Reserve’s interest rate outlook will likely play significant roles in shaping the near-term direction for Bitcoin, Ether, and the broader market. Traders and investors are closely watching these developments as they weigh the potential for gains against the backdrop of economic uncertainty.