The price of bitcoin fell sharply and suddenly to start the week as investors awaited a major Federal Reserve policy decision and digested concerns around Binance.
Bitcoin was last lower by more than 3% at $29,121.60, according to Coin Metrics. Earlier, it sank as low as $28,995.02, its lowest level in more than a month.
The reason behind the sharpness in the drop is unclear, although the move coincided with a Wall Street Journal report augmenting recent anxiety from investors around Binance. Specifically, CEO Changpeng “CZ” Zhao reportedly suggested in private conversation in 2019 that Binance affiliates had accounted for a portion of trading volume around the time it launched its U.S. trading arm. There are questions about whether this activity constituted “wash trading” aimed at inflating volume.
Binance is the largest crypto exchange in the world. It was sued by the Securities and Exchange Commission last month and is at the center of a Department of Justice investigation that’s likely to end with a consent decree or settlement, CNBC previously reported. Federal prosecutors have been weighing anti-money laundering violations and sanctions evasion charges, allegations that would make it difficult for Binance or founder Zhao to continue to get licenses to operate.
Not everyone is convinced the big move could be put on the Binance story, however.
“You could probably chalk it up to technicals or flows,” said Callie Cox, analyst at investing firm eToro. ”$30,000 is a big deal, and it makes sense that bitcoin investors are feeling more nervous around these levels. Recoveries aren’t always a straight line up.”
Elsewhere, investors are also watching what the Federal Reserve does at the conclusion of its two-day meeting on Wednesday.
“Bitcoin is still fluctuating within a narrow range for a little more than a week, and it will likely continue to do so until the conclusion of this week’s FOMC meeting,” said Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank. “The market has almost fully priced in another 25 basis point rate hike by the Fed this week and is paying close attention to whether they are going to carry out another by the end of this year as FOMC’s previous economic outlook suggested.”
Rate increases helped pull bitcoin’s price lower throughout 2022, which was already filled with several negative catalysts for the industry. Despite the recent resilience in bitcoin and rally in equities, recession concerns remain as traders weigh the lagged effect of rate hikes and recent signals of slowing in the economy.
“We have yet to see June’s personal consumption expenditure … and they will not likely hasten to make the decision to halt rate hikes until they have more data and are more confident that inflation is coming down,” Hasegawa added. “This means that FOMC’s rate decisions henceforth will likely continue to be ‘live,’ and bitcoin may not successfully break out of $31,500 for another while.”
