Hawks' "Dot Plot" Crushes Crypto Market! Bitcoin Price Hits One-Month Low

According to the Zhitong Finance and Economics APP, the trading price of Bitcoin, the world's largest market value cryptocurrency, has hit the lowest point in a month. The main reason may lie in the accelerated outflow of funds from digital asset investment products and the weakening prospect of the overall valuation of the cryptocurrency market due to the rising long-term borrowing costs set by the Federal Reserve. On Tuesday, the price of Bitcoin, the largest market value cryptocurrency, fell by nearly 3% at one point, reaching the level of mid-May, and then the decline narrowed, currently hovering around $65,740. Smaller cryptocurrencies such as Ethereum, Solana, and Dogecoin have also experienced varying degrees of price declines.

This round of long-term digital asset prosperity that began in 2023 now seems to be gradually fading, with some analysts expressing doubts about the prospects of inflows into cryptocurrency-related assets such as Bitcoin ETFs. The latest data from CoinShares International Ltd. shows that investors withdrew as much as $600 million from cryptocurrency-related products such as Bitcoin ETFs last week, marking the largest outflow since March.

Overall, the stubborn and sticky inflation rate in the United States has led traders to lower their expectations for a rate cut by the Federal Reserve this year, as well as an upward trend in expectations for the Fed's long-term "neutral rate." The rise in long-term borrowing costs poses a significant threat to the speculative investment prospects of cryptocurrencies, potentially exerting long-term pressure on the valuation of cryptocurrencies.

The latest "dot plot" of interest rates released by the Federal Reserve currently shows that most Fed officials expect only one rate cut in 2024, which is two cuts less than the March dot plot forecast, totaling a reduction of 50 basis points.

In addition, with the significant reduction in rate cut expectations this year, Fed officials have simultaneously raised the policy rate path for 2025. The median expectation for the year-end rate in 2025 has been slightly raised from 3.9% to 4.1%, while the median expectation for the long-term policy rate has been raised from 2.6% to 2.8%. This also means that most Fed officials are more accepting of the reality that the "neutral rate" is rising.

In this quarter, the investment returns of traditional assets such as stocks and bonds have far outperformed Bitcoin, the hot new asset sweeping the globe. This marks a significant reversal compared to the three months ending in March, when many cryptocurrency assets, including Bitcoin, outperformed traditional assets such as stocks and bonds BTC Markets Pty CEO Caroline Bowler said, "Cryptocurrencies like Bitcoin are increasingly vulnerable to macro factors such as Fed rate expectations." She added that she remains optimistic about the long-term investment prospects of cryptocurrencies.

Rare setbacks for newly listed cryptocurrencies

There are clear signs of decreased investor appetite and risk preference in the entire crypto market, including demand for new cryptocurrencies. The ZK token, from a highly anticipated project built on the Ethereum blockchain, plummeted by a third after its debut on Monday, marking the latest in a series of highly anticipated cryptocurrency launches. However, the significant sell-off encountered by this new token is rare for newly listed cryptocurrencies.

In South Korea, a recent local report indicates that upcoming securities trading regulations next month may force cryptocurrency exchanges to reduce the number of cryptocurrencies available for investors to trade. South Korea has long been a core engine for demand for small-cap cryptocurrencies (known as altcoins), and this report may have spooked some cryptocurrency traders, prompting them to sell off some of the more obscure cryptocurrency assets.

It is worth noting that since the beginning of 2023, the trading price of Bitcoin has doubled and hit a historical high of $73,798 in March this year. With the massive influx of funds brought by Bitcoin ETFs, not only has the total market value of Bitcoin, the world's largest cryptocurrency, continued to grow, but the market values of many relatively smaller cryptocurrencies like Ethereum have also expanded since this year.

Bitcoin and many other cryptocurrencies like Ethereum have continued their upward trend since 2023, with a collective surge surpassing that of 2023, mainly driven by the explosive demand for the first batch of Bitcoin ETF products listed in the United States. However, with the recent significant slowdown in ETF fund inflows, Bitcoin prices have cooled off recently, and smaller cryptocurrencies like Ethereum have also shown a downward price adjustment trend