Finance

Bitcoin extends its slide to start May, falling to $57,000 as Fed leaves rates unchanged

Published

1 year ago

May 2, 2024

Business Finance News

Nicolas Economou | Nurphoto | Getty Images

Bitcoin slid to its lowest level in over two months to kick off May, as the Federal Reserve held interest rates steady.

The cryptocurrency at one point dropped 5% to $56,526.00, its lowest level since Feb. 27, according to CoinMetrics. It was last lower by about 4% at $56,954.13.

Investors have been focused on the latest interest rate decision from the Federal Reserve, which concluded its two-day policy meeting on Wednesday afternoon. The central bank kept its benchmark short-term borrowing rate unchanged, as expected. The federal funds rate has been in a targeted range between 5.25% and 5.50% since July 2023.

“The broader macro backdrop has deteriorated for assets like crypto that thrive on liquidity,” Geoff Kendrick, Standard Chartered’s head of digital asset research, said in a note Wednesday. “Broader liquidity measures in the U.S. … have deteriorated rapidly since mid-April.”

Bitcoin falls to its lowest level since February

Bitcoin briefly rallied as high as $60,989.58 before reversing lower.

“Higher real interest rates have likely supported the dollar and weighted on bitcoin over the last month,” said Zach Pandl, head of research at Grayscale Investments. “The FOMC statement expressed concern about inflation, but did not take rate cuts off the table. An expectation of future rate cuts would support bitcoin’s price and crypto markets, more broadly.”

Bitcoin has been trading in a tight range, with key catalysts for the cryptocurrency — U.S. exchange-traded funds and the halving — now behind it. Its retreat from March all-time highs intensified this week amid broader risk-off sentiment. Bitcoin is down more than 10% for the week, and on Tuesday it posted its worst month since November 2022.

Kendrick also pointed to five consecutive days of outflows from U.S. bitcoin ETFs and a “poor” reaction to the launch of spot bitcoin ETFs in Hong Kong this week. The drop in bitcoin also comes a day after the former CEO of Binance, Changpeng Zhao, was sentenced to four months in prison over money laundering charges.

Bitcoin investors expect a strong recovery in the cryptocurrency later this year but say its price could continue to chop for the next few weeks given macro and geopolitical pressures.

“We could see a 1-2 month consolidation in bitcoin prices, trading in a range with swings of $10,000 on either side,” said analysts at Bitfinex. “We expect the positive impact of the halving, which has brought about a reduction in bitcoin supply, will be seen in later months.”

—CNBC’s Michael Bloom and Jeff Cox contributed reporting.

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Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

23 hours ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

1 day ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”