As a seasoned crypto investor, I’ve seen my fair share of market fluctuations. The recent drop in Bitcoin’s price to around $56,556 has left me feeling a mix of unease and opportunity. The sharp decline, which represents the steepest monthly drop since November 2022, has been influenced by several factors.
Bitcoin experienced a substantial decrease on Wednesday morning in Europe, reaching a low of $56,556. This is the lowest point for Bitcoin since late February. The recent downturn signifies the most pronounced monthly drop since November 2022, with approximately 7.5% decline observed over the past day. Bitcoin broke through the previously robust $60,000 support level on Tuesday night.
#1 Derisking Before Today’s FOMC Meeting
As a researcher studying financial markets, I can tell you that there’s palpable excitement and apprehension in the industry as we approach the Federal Open Market Committee (FOMC) interest rate decision due later today. This announcement holds significant weight given the heightened sensitivity of the crypto market, particularly Bitcoin, to macroeconomic indicators.
As a researcher examining current economic trends, I’ve noticed that recent data indicating a deceleration in GDP growth alongside persistent inflation has led the Federal Reserve to reconsider their plans for interest rate cuts. In the financial markets, assets like Bitcoin are facing pressure due to a stagflationary environment, geopolitical tensions, and seasonal liquidity fluctuations, as noted by Ted from TalkingMacro.
As a crypto investor, I’ve seen a significant change in market expectations regarding Federal Reserve interest rate cuts. Initially, there was a widespread belief that up to seven rate reductions could be on the table by the end of 2024. However, this outlook has dramatically shifted. Now, the markets are pricing in only one potential cut by December 2024.
In a surprising turn of events, Ted observed that the market has challenged the Federal Reserve’s expectation for rate cuts in 2024, promptly acting on the speculation that the Fed might not reduce interest rates at all during that period.
#2 Cyclical Bitcoin Correction Phase
After an impressive surge in the market since the beginning of the year, there is currently a normal adjustment period taking place. Before the recent price drop, Charles Edwards, Capriole Investments’ founder, remarked, “We are just one day away from surpassing the record set in 2011 for consecutive days without a significant downturn of 25% or more,” highlighting the remarkable streak of Bitcoin’s growth.
Scott Melker, referred to as “The Wolf Of All Streets,” pointed out several technical signs hinting at an upcoming adjustment. Prices dipped and revisited previous support levels as resistance. Notably, the RSI (Relative Strength Index) didn’t visit oversold territory yet, but it is approaching that point now across all timeframes. It is essential to note that this correction represents only about 23% of the market’s growth, which is typical for a bull market and consistent with previous corrections during this run. However, we have not experienced a more substantial pullback of around 30-40%, as has been common in past markets.
$BTC Daily
Broke and retested range lows as resistance. Nothing but air until around $52,000 on the chart.
As a dedicated crypto investor, I’ve expressed my major concern for quite some time now. Specifically, I’ve mentioned in my newsletters that the Relative Strength Index (RSI) hasn’t visited the oversold territory. This indicates that selling pressure has been weak despite the potential for a significant price correction. It’s important to keep an eye on this trend as it could be a sign of a potential market top or an opportunity for a strategic entry into undervalued assets.
Almost there now, all lower time frames oversold.
This…
— The Wolf Of All Streets (@scottmelker) May 1, 2024
As a seasoned crypto investor, I’ve noticed that traditional finance markets and experienced investors are cashing in on their substantial gains. The Commodity Exchange (CME) open interest has been decreasing rapidly. For instance, there were 135,600 coins open for trading on April 29th, which dropped to 123,900 coins the next day. The peak was around 170,400 coins back on March 20th. RunnerXBT, a crypto analyst, elaborated on this trend.
As a crypto investor, I’ve noticed that the recent trend in the market confirms my belief that many investors entered long positions back in October 2023, driven by the approval of the Bitcoin ETF and the hype surrounding the upcoming halving event. Now, with those significant events having played out, these investors are taking profits on their gains. Despite still being up significantly, they’re not content with just sitting on their BTC investments; instead, they’re cashing in some of their profits. After all, they initially bought Bitcoin, not altcoins that could potentially be dead.
TradFi/Boomers are taking profits
CME Open Interest is decreasing rapidlyApril 29th 135,6k coinsApril 30th 123,9k coins
Topped around 170.4k coins (March 20th)
As a crypto investor, I can confirm that the price movements I observed in October 2021 strongly support my belief that many investors were eagerly anticipating the approval of Bitcoin ETFs during that time.
— RunnerXBT (@RunnerXBT) May 1, 2024
The situation involving Bitcoin ETFs in the market has become tense, as demonstrated by recent events in both the US and Hong Kong. In the US, there have been considerable withdrawals from Bitcoin ETFs, suggesting that investors are losing interest.
Based on the most current figures, US Bitcoin spot ETFs witnessed a collective withdrawal of approximately $161.6 million. Among these, Grayscale Bitcoin Trust (GBTC) recorded the largest outflow with $93.2 million, while Fidelity and Bitwise experienced withdrawals of $35.3 million and $34.3 million respectively. BlackRock reported no net change in flows. These figures indicate a decrease in institutional investment, which has historically acted as a stabilizing factor against market fluctuations.
In line with the US market experience, the introduction of Bitcoin and Ethereum ETFs in Hong Kong fell short of expectations, recording only a total trading volume of $11 million across six newly launched funds. This figure pales in comparison to the projected $100 million and represents a substantial underperformance. The Bitcoin spot ETFs accounted for $8.5 million of this volume, significantly lower than the impressive first-day volumes of US-listed Bitcoin spot ETFs, which reached an astounding $655 million.
In the past day, substantial long positions worth a combined $451.28 million have been liquidated in the cryptocurrency market. The largest single liquidation occurred on OKX involving an ETH-USDT-SWAP at $6.07 million. Notably, Bitcoin-related liquidations totaled $143.04 million. Data from CoinGlass indicates this mass selling has intensified the downward pressure on Bitcoin prices.
At press time, BTC traded at $57,715.
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2024-05-01 14:47