Bitcoin (BTC) witnessed a significant drop, falling to $56,556 during Wednesday morning in Europe, marking the lowest point since late February. This slowdown represents the steepest monthly decline since November 2022, with BTC falling approximately 7.5% in the last 24 hours and breaking previously stable support at $60,000 on Tuesday evening.
#1: Derisking before today’s FOMC meeting
Anticipation and anxiety are high in financial circles as the Federal Open Market Committee (FOMC) is expected to announce its interest rate decision later today. This event is crucial, as the cryptographic market, namely Bitcoin, has grown increasingly reactive to macroeconomic signals.
Recent data, which reflect a slowdown in GDP growth combined with persistent inflation, have significantly reduced expectations of interest rate cuts by the Federal Reserve. “Bitcoin and other risk assets are currently feeling pressure from a stagflationary environment, geopolitical tensions, and seasonal liquidity variations,” commented Ted from TalkingMacro.
Initially, up to seven rate cuts were forecast by the end of 2024, a sentiment that has changed drastically, with the market now pricing in just one potential cut by December 2024. This change comes in an environment where inflation data is trending rising, challenging the Federal Reserve’s position and potentially leading to a more cautious approach by Jerome Powell, the Fed chairman.
“For the first time in recent memory, the market is calling the Fed’s bluff, quickly advancing the idea that the Fed may not cut at all in 2024,” Ted noted.
#2 Bitcoin Cyclical Correction Phase
After an exceptional recovery since the beginning of the year, the market is going through a phase of natural correction. Before the price crash, Charles Edwards, founder of Capriole Investments, observed: “We are one day away from breaking the record set in 2011 for days without a significant drop (-25%)”, emphasizing the extraordinary nature of Bitcoin’s recent performance.
Scott Melker, known as “The Wolf of All Streets,” highlighted technical indicators that suggested an imminent correction. “It Broke and retested the range lows as resistance. (…) My biggest concern, which I have been discussing for months, (was) that the RSI never reached the oversold level. Almost there now, all the lower time frames have been oversold. This is still ONLY a 23% correction, very shallow for a bull market and consistent with other corrections in this run. We have not yet seen a 30-40% pullback during this bull market like those in the past.”
$BTC Daily
It broke and retested the range lows as resistance. Nothing but air until about $52,000 on the chart.
My biggest concern, which I have been discussing for months (in the newsletter), is that the RSI never reached the oversold level.
Almost there now, all the lower time frames have been oversold.
That… pic.twitter.com/5YZTWipBo8
– The Wolf of Every Street (@scottmelker) May 1, 2024
#3 Making profits
Traditional financial markets and savvy investors are seizing the opportunity to take profit after substantial gain. “TradFi/Boomers are taking profits: CME Open Interest is decreasing rapidly, Apr 29 135.6K coins, Apr 30 123.9K coins, surpassed around 170.4K coins (March 20),” explained crypto analyst RunnerXBT.
This trend confirms a broader profit-taking strategy following significant events such as ETF approval and anticipation around the Bitcoin halved. “This (…) confirms my thesis that a lot of these guys were looking forward to October 2023 because of the ETF approval and the BTC halving, the trade is over and now they are taking profits (yes, they are still going up a lot), because they craved BTC not dead altcoins.”
TradFi/Boomers are taking profits ✅
CME Open Interest Is Rapidly Declining
April 29th 135.6 thousand coins
April 30th 123.9 thousand coinsSurpassed around 170.4 thousand coins (March 20)
This at least for me confirms my thesis that many of these guys were looking forward to October 2023 because of the ETF approval… pic.twitter.com/M8KY1NfCtK
-RunnerXBT (@RunnerXBT) May 1, 2024
#4 US ETF Flows and Hong Kong Disappointment
The dynamics surrounding spot Bitcoin ETFs have shown significant tensions, evidenced by recent activity in the US and Hong Kong markets. In the United States, Bitcoin exchange-traded funds (ETFs) faced substantial outflows, indicating a cooling in investor sentiment.
According to recent data, total US spot Bitcoin ETF outflows amounted to $161.6 million. Notably, Grayscale Bitcoin Trust (GBTC) recorded outflows of $93.2 million, while Fidelity and Bitwise recorded outflows of $35.3 million and $34.3 million, respectively. BlackRock had zero net flow once again. These numbers suggest a retreat in institutional interest, which has traditionally been a bulwark against price volatility.
Parallel to the USA, the debut of Bitcoin ETFs in Hong Kong was also significantly below expectations. Six newly launched ETFs aimed at capturing the Bitcoin and Ethereum markets collectively reached just $11 million in trading volume, sharply underperforming the $100 million forecast. Spot Bitcoin ETFs accounted for $8.5 million in trading volume. This was significantly lower than the launch day volumes of US-based spot Bitcoin ETFs, which reached $655 million on their first day.
#5 Long Settlements
The market was also impacted by substantial long liquidations, with a total of US$451.28 million liquidated in the last 24 hours alone. The largest single liquidation was an ETH-USDT-SWAP on OKX valued at $6.07 million, but Bitcoin-specific liquidations were also significant, totaling $143.04 million, according to data from CoinGlass. These sell-offs have increased selling pressure on Bitcoin.
At press time, BTC traded at $57,715.
Featured image from iStock, chart from TradingView.com
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