Bitcoin (BTC) has witnessed a significant decline, falling to $56,556 in Europe on Wednesday morning, marking its lowest point since late February. This downturn represents the sharpest monthly drop since November 2022, with BTC falling around 7.5% over the past 24 hours and breaking through the previously stable support at $60,000 late Tuesday.
#1 Derisking before today’s FOMC meeting
Expectations and fears are high in financial circles now that the Federal Open Market Committee (FOMC) will announce its interest rate decision later today. This event is critical as the crypto market, and Bitcoin in particular, has become increasingly reactive to macroeconomic signals.
Recent data, reflecting a slowdown in GDP growth combined with persistent inflation, has significantly lowered expectations of interest rate cuts from the Federal Reserve. “Bitcoin and other risky assets are currently feeling the pressure of a stagflationary environment, geopolitical tensions and seasonal liquidity variations,” noticed Ted from TalkingMacro.
Initially, up to seven rate cuts were expected by the end of 2024, a sentiment that has dramatically reversed as the market is now pricing in just one possible rate cut in December 2024. This shift comes in an environment where inflation rates are trending upward, challenging the Federal Reserve’s stance could lead to a more cautious approach from Fed Chairman Jerome Powell.
“For the first time in recent history, the market is calling the Fed’s bluff, quickly raising the prospect that the Fed may not cut spending at all in 2024,” Ted said.
#2 Cyclical Bitcoin Correction Phase
After an exceptional rally since the beginning of the year, the market is undergoing a natural correction phase. Before the price crash, Charles Edwards, founder of Capriole Investments, noted: “We are one day short of breaking the 2011 record, going days without a significant dip. [-25%]”, highlighting the extraordinary nature of Bitcoin’s recent performance.
Scott Melker, known as ‘The Wolf Of All Streets’, highlighted technical indicators pointing to an impending correction. “Break and retested lows as resistance. […] My biggest concern that I have been discussing for months [was] that RSI never made the journey to oversold. Almost there now, all lower time frames are oversold. This is still ONLY a 23% correction, very shallow for a bull market and consistent with other corrections during this run. We have yet to see a 30-40% pullback like those of the past during this bull market.”
$BTC Daily
Broke and retested reaching lows as resistance. Nothing but air until about $52,000 on the card.
My biggest concern that I have been discussing for months (in the newsletter) is that RSI never made the journey to oversold.
Almost there now, all lower time frames are oversold.
This… pic.twitter.com/5YZTWipBo8
— The Wolf of All Streets (@scottmelker) May 1, 2024
#3 Profit taking
Traditional financial markets and seasoned investors are seizing the opportunity to take profits after making substantial gains. “TradFi/Boomers Take Profits: CME Open Interest Declines Rapidly, April 29 135.6k Coins, April 30 123.9k Coins, Peaking Around 170.4k Coins (March 20),” explains crypto analyst RunnerXBT.
This trend confirms a broader profit-taking strategy following key events such as the ETF approval and Bitcoin halving expectations. “That […] confirms my thesis that in October 2023, many of these guys longed for ETF approval and BTC halving, the trade was played out and are now taking profits (yes, they are still up a lot), because they longed for BTC and not dead altcoins .”
TradFi/Boomers take profits ✅
CME Open Interest is declining rapidly
April 29 135.6k coins
April 30 123.9k coinsTopped with approximately 170.4k coins (March 20)
That certainly confirms for me my statement that a lot of these guys were longing for in October 2023 due to 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 tension, as evidenced by recent activity in both the US and Hong Kong markets. In the United States, Bitcoin Exchange-Traded Funds (ETFs) saw significant outflows, indicating that investor sentiment is cooling.
According to recent factsTotal outflows from US spot Bitcoin ETFs amounted to $161.6 million. Notably, Grayscale Bitcoin Trust (GBTC) saw outflows of $93.2 million, while Fidelity and Bitwise recorded outflows of $35.3 million and $34.3 million, respectively. BlackRock again had zero net flows. These figures indicate a retreat in institutional interest, which has traditionally been a bulwark against price volatility.
Parallel to the US, the debut of Bitcoin ETFs in Hong Kong also fell significantly below expectations. Six newly launched ETFs, aimed at conquering both the Bitcoin and Ethereum markets, collectively achieved a trading volume of just $11 million, clearly underperforming the expected $100 million. The 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 had reached $655 million on their first day.
#5 Long liquidations
The market has also been impacted by significant prolonged liquidations, with a total of $451.28 million liquidated in the last 24 hours alone. The largest single liquidation was an ETH-USDT-SWAP on OKX worth $6.07 million, but Bitcoin-specific liquidations were also significant, totaling $143.04 million, according to facts from CoinGlass. These liquidations have increased selling pressure on Bitcoin.
At the time of writing, BTC was trading at $57,715.
Featured image from iStock, chart from TradingView.com
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