Prices for cryptocurrencies are sliding lower ahead of the June 17 interest rate decision by the U.S. Federal Reserve.
Bitcoin (BTC), the largest cryptocurrency by market capitalization, is down about 1% and trading at $64,700 U.S. The price of Bitcoin had begun the trading week at $66,500 U.S.
Other cryptocurrencies such as Ethereum (ETH), Solana (SOL), and XRP (XRP) are each down more than 2% as markets await the U.S. central bank’s latest decision on interest rates.
The U.S. Federal Reserve is widely expected to hold its benchmark Fed Funds Rate in its current range of 3.50% to 3.75% for a fourth consecutive meeting.
Risk assets such as cryptocurrencies tend to perform better when interest rates are lower. The prospect of higher for longer interest rates has investors and traders moving out of crypto.
Economists say the Federal Reserve has little room to lower interest rates with the annual inflation rate in America currently at 4.2%, its highest level in three years.
The Federal Reserve targets inflation at a 2% annualized rate.
Analysts and market watchers expect the central bank to change its post-meeting statement so that it no longer signals the central bank's next move will be to reduce interest rates.
Such a change would suggest to markets that the central bank could leave interest rates unchanged for an extended period or even raise them later this year.
Markets are currently pricing in a 64% chance that the Federal Reserve will raise interest rates by 25-basis points at its December 2026 meeting.
The current situation is not favourable for risk assets such as Bitcoin and Ethereum, exerting downward pressure on digital assets.
Crypto bulls say that lower interest rates would be a tailwind for cryptocurrencies and act as a catalyst for the beaten down asset class.
However, markets do not expect interest rates to move lower anytime soon given the current state of inflation in America.
