Bitcoin is trading flat ahead of this week's US Federal Reserve meeting on interest rates, with market data signaling investors are poised to sell if macroeconomic conditions worsen.
The price of the world's largest digital asset (BTC-USD) by market capitalisation has dropped from it's psychologically important $30,000 (£23,960) level at the end of April to $28,600, as of the time of writing.
According to data from Coingecko, the global cryptocurrency market cap today is $1.23tn (£0.98tn), an increase of 1.7% in the past 24 hours. However, recent increases in the inflow of bitcoin on to exchanges suggests potential sell-offs are looming.
Read more: Crypto live prices
Since the beginning of May, more than 5,000 bitcoins have been transferred to exchanges, with reserves of the digital asset across all cryptocurrency exchanges consistently rising since April 4th, according to data from CryptoQuant.
The increased supply of bitcoin on exchanges suggests investors are poised to sell if the Fed's anticipated rise in its benchmark interest rate pushes the US economy towards recession.
If bitcoin maintains its pattern of marching in lockstep with equity markets, which would be adversely affected by a higher rate, then BTC holders could sell in favour of US Treasury bonds.
Federal Reserve interest rates meeting
On Wednesday the US Federal Reserve is expected to raise interest rates by 25 basis points for the third consecutive time.
While headline annual consumer inflation fell in March, core inflation increased, leaving economists divided on the Fed's course of action.
The Fed is expected to weigh its decisions carefully due to the recent credit crunch and bank failures in the US banking sector.
Although inflation has declined to 5%, there are macro-economic stresses that could reverse the recent cooling such as OPEC's oil production cuts and increased energy demand from China.
Standard Chartered analyst forecasts bitcoin to surge by $20,000 if US defaults on debt obligations
Geoff Kendrick, head of forex research at Standard Chartered, has predicted that if the United States defaults on its debt obligations, the price of bitcoin could surge by $20,000, while other cryptocurrencies like Ethereum may decline.
Though he considers a US debt default a "low-probability, high-impact event," bitcoin's reputation as a safe haven and its historical performance during market downturns support his prediction.
Previously Kendrick forecasted that bitcoin will surpass $100,000 by the end of 2024, driven by factors such as US banking turmoil, the bitcoin halving event, and successive Federal Reserve rate hikes.