Bitcoin Drops Over 7% Amid Interest Rate Decision and Bearish Investor Sentiments
Summary:
Bitcoin's (BTC) value has been retreating over the last month and on May 1, it dropped by over 7% to roughly $56,550. This trend suggests a potential shift in market sentiment, noticeable with traders locking in profits amid anticipation of a bearish market. Contributing factors include the Federal Reserve's interest rate decision and Powell's comments on inflation. Investor sentiment is also reflected in the withdrawal of capital from Bitcoin ETFs, the wider liquidation of long positions, decreased funding rate, and key technical chart patterns. Bitcoin may be heading toward a target of $50,000 by June.
For over a month, Bitcoin's (BTC) value has been retreating from its peak near $73,800. On May 1, it fell further still, with a more than 7% intraday drop to roughly $56,550, marking a low point not seen since February. With approximately 23.40% decline from its topmost record, it's an indicative shift in market sentiments. It seems traders are starting to secure their profits, foreseeing potentially bearish turn of events.
The plunge in the price of Bitcoin on May 1 can be primarily attributed to the expectations leading up to the Federal Reserve's decision on interest rates later in the day, where investors were keen on the following press addressing by U.S. central bank chairman Jerome Powell. Given his previous remarks highlighting the ongoing struggle against inflation and the upcoming April 26 employment report, it's unlikely he will change his position in his forthcoming address.
Ahead of the Federal Reserve meetings, the benchmark U.S. 10-year Treasury note yield increased to 4.69% on May 1, up from 4.60% on the previous day due to prolonged expectations of high-interest rates. This increase in yields has made non-yielding assets like Bitcoin less attractive.
Meanwhile, the de-risking sentiment is also evident in Bitcoin exchange-traded funds (ETFs), where investors have been pulling out capital continuously. The combined holding of these ETFs was about $1.178 billion on April 30, a drop of roughly 10% from their peak a week ago at $1.295 billion. Grayscale's GBTC fund saw the most outflow during this period, primarily because it charges higher fees.
However, the influx into other Bitcoin ETFs has slowed noticeably, with BlackRock's iShares Bitcoin Trust (IBIT) witnessing a slowdown since April 24, following the announcement of the U.S.'s disappointing GDP and heightened inflation report.
The wider clearing of long positions led to Bitcoin's underperformance today, with over $166 million in liquidations over the past 24 hours, $145.35 million of these being long. When long positions are liquidated, it usually involves disposing of the asset, which can drive the price lower.
Bitcoin's funding rate displays the willingness long investors are ready to pay short to keep their positions open. Currently at around 0.165% per week, this rate has seen a substantial decrease from its 2024 peak of over 2% per week.
Lastly, Bitcoin's price slide today forms part of a broader retracement that began after coming across a significant falling trendline resistance, a part of the prevailing descending triangle pattern of Bitcoin when viewed alongside its flat trendline support.
On May 1, Bitcoin's price was breaching the lower trendline of the descending triangle, an activation of the descending triangle drop. Following this breach, the price could fall by an amount equivalent to the height of the triangle, possibly directing Bitcoin towards a target of $50,000 by the end of June.
No investment decision should be made based on this information without undertaking independent research. Every decision entails risk.
Published At
5/1/2024 1:23:49 PM
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