Bitcoin pulled back on Wednesday after briefly climbing above $126,000 earlier this week, with traders cashing in profits and a stronger U.S. dollar putting pressure on the market.
By midday, Bitcoin was down about 1.7%, trading around $122,784. The world’s largest cryptocurrency had reached a new record high on Monday, boosted by large inflows into Bitcoin exchange-traded funds (ETFs) and bets that the U.S. dollar would weaken during the ongoing government shutdown.
Many investors had piled into what’s known as the “debasement trade,” betting that political and fiscal uncertainty would hurt the value of traditional currencies and drive demand for Bitcoin.
However, as the U.S. government shutdown drags into its second week, traders are growing more cautious. The delay of key economic reports and the possibility that the Federal Reserve may hold off on cutting interest rates have made investors more risk-averse. In times like this, money tends to move into safer assets, which reduces demand for volatile options like cryptocurrencies.
Stan Low from financial platform Grvt said the recent price dip was likely caused by traders taking profits and liquidating positions after Bitcoin’s big rally. He added that the duration of the U.S. shutdown and its impact on loans and jobs will be key factors to watch.
Meanwhile, the U.S. dollar index strengthened, adding further pressure on Bitcoin and other digital assets.
Traders are now waiting for the release of minutes from the Federal Reserve’s September meeting and comments from central bank officials later this week, which could offer clues about future interest rate decisions.
The broader crypto market also struggled on Wednesday. Ethereum, the second-largest token, dropped 5.7% to $4,477. XRP slid 3.8% to $2.87, Solana fell 4%, Cardano dropped 5.5%, and Polygon declined 4.7%. Among meme coins, Dogecoin also tumbled about 4.7%, reflecting a wider pullback across the crypto sector.
