In early Asian trading on Tuesday, Bitcoin, the largest cryptocurrency by market value, fell as much as 2.3% to hit $63,414, its lowest level in nearly 11 days. Ethereum also weakened in tandem, dropping 3.6%. Market sentiment was mainly influenced by the upcoming interest rate decision from the Federal Reserve, with rising expectations of a rate hike making investors more cautious.
On Tuesday and Wednesday of this week, local time, the Federal Reserve will hold its policy meeting and release its interest rate decision. Although the market generally expects the benchmark rate to remain unchanged, Citadel Securities has forecast that the Fed will unexpectedly raise rates by 25 basis points on Wednesday, arguing that such a move would help bolster the credibility of Fed Chair Kevin Warsh in addressing inflation. Traders are currently pricing in about a one-in-three chance of a rate hike. Ahead of this decision, there is significant divergence in market judgment on whether rates will rise, a situation that has been extremely rare in recent years. The new policies pushed by Warsh are amplifying market uncertainty, with the core shift being the abandonment of traditional “forward guidance” in favor of a decision-making model that relies more heavily on real-time data, internal deliberation, and reduced transparency. As higher borrowing costs typically prompt capital to flow out of risk assets such as Bitcoin, market sentiment has been clearly suppressed.
Caroline Moron, co-founder of Orbit Markets, stated that Bitcoin’s decline was mainly driven by the rising possibility of a Fed rate hike and concerns over credit risks related to artificial intelligence. She expects Bitcoin’s next downside target to be $62,000, with strong support near $60,000. Meanwhile, Nvidia (NVDA) is advancing a new round of AI infrastructure deals, with potential scale exceeding $750 billion, fueling investor worries over associated financial risks. The price of its five-year credit default swaps posted the largest single-day increase on July 27. Critics have pointed out that such transactions may be circular in nature and could artificially inflate industry demand and valuations. Additionally, U.S.-listed Bitcoin exchange-traded funds (ETFs) saw net outflows exceeding $465 million on July 23 and 24, ending a seven-day streak of inflows and reflecting the fragility of the recent rebound.
Despite the overhang of rate-hike concerns, the U.S. Digital Asset Market Structure and Investor Protection Act has recently made progress in the Senate. The bill aims to clarify the attributes of digital assets and define regulatory boundaries, potentially paving the way for industry compliance and facilitating traditional financial institutions’ participation in digital commodity custody and trading. Tony Sycamore, an analyst at IG Australia, maintained a neutral stance on Bitcoin, stating that it still needs to continuously break through and close above the 200-day moving average ($72,001) to eliminate mid-term downside risks and revive market enthusiasm.
On the other hand, the latest analysis released by Grayscale shows that the recently launched Grayscale Ethereum Trust spot ETF (ETHE) has attracted funds at a pace significantly exceeding that of major mainstream cryptocurrency ETFs such as those for Bitcoin, Ethereum, SOL, and XRP during similar early-stage periods. Data indicates that Bitcoin ETFs have seen the most stable inflows, Ethereum ETFs have shown notable mid-term growth momentum, and the ETHE ETF has been particularly outstanding in its initial capital accumulation speed. The analytical method based on the ratio of market capitalization to cumulative inflows provides a more objective comparative basis, reflecting strong investor interest in the ETHE ETF during its early development phase.
