Crypto Market Contracts Amid Wavering Confidence; Bullish Breakout on the Horizon?
Summary:
The cryptocurrency market saw a drop with the total market capitalization decreasing by 2.82% to $2.23 trillion on April 29. This is partly due to the Depository Trust Company's decision not to accept crypto-related ETFs as collateral for line-of-credit facilities, and continued outflows from U.S. based Bitcoin ETFs. There are concerns about whether the U.S. Federal Open Market Committee will maintain higher interest rates for a longer period due to underperformance of the U.S. economy in Q1 2024, potentially making crypto assets less attractive. However, the current market activities fall within a correction trend possibly pointing towards a future 'bull flag' breakout.
Today, the crypto market showcased a downward trend, evidenced by a 2.82% decline in the total market capitalization, which settled at $2.23 trillion on April 29. Bitcoin (BTC), the dominant player in the cryptocurrency market, showed a decrease, slipping by 1.84% and hovering around $61,940. On the other hand, Ether (ETH), the second key player, performed below Bitcoin, with a 3.28% dip, making its price around $3,155 on the same date. Latest performance charts show crypto market capitalization's year-to-date interplay with BTC/USD and ETH/USD.
The crypto market's value started to dive following the Depository Trust Company's (DTC) resolution not to accept crypto-associated exchange-traded funds (ETFs) as collateral for credit line facilities.
A credit line is a financial resource that lending institutions can draw on for smooth and consistent clearing and trade settlements, ensuring successful transactions even amid momentary liquidity downturns among engaged parties.
As a principal securities depository, the DTC oversees securities transactions. The company's decision not to allocate collateral value to crypto-related ETFs implies participants cannot utilize these funds for securing short-term loans. This situation can potentially affect the fluidity and operation adaptability of financial organizations handling such products.
Sakuzi, an independent market analyst, suggested the potential domino effect that this decision may ignite, as he stated, "This could further impact the crypto markets and make it more difficult for companies to leverage crypto as collateral."
In addition to the credit line collateral issue, the fall in the crypto market coincides with the continuous outflows from the U.S. based Bitcoin ETFs. It's worth noting that there has been a withdrawal of around $421.8 million from these funds since April 24, simultaneous with a 4.75% decline in crypto market capitalization, indicating a period of risk exposure reduction among investors.
Given the underwhelming performance of the U.S. economy in Q1 2024, amid stubborn inflation, crypto traders are understandably cautious. These economic setbacks might prompt the U.S. Federal Open Market Committee to maintain higher interest rates for a longer period in their May 1 meeting, making risky assets like cryptocurrencies less attractive for traders and institutional investors moving forward.
Although today's decline in the crypto market is a cause for concern, it falls within a correction trend that began on March 14, ever since the market valuation hit a high of around $2.721 trillion. From there, the market seems to be consolidating in what looks like a bull flag pattern.
As of April 29, the market was staring at a potential drop towards the flag's lower trendline at about $2.119 trillion. Interestingly, this point has acted as a support line multiple times since the start of March, promising a possible bounce back towards the flag's upper trendline at approximately $2.40 trillion by May.
If the bull flag breakout gets confirmed with a surge above $2.4T, and a breach of the upper trendline accompanies increasing trade volumes, the market could potentially hit a bullish target of around $2.945 trillion by June. Please note that this article does not in any way suggest or recommend investment strategies. Every investment or trading decision comes with a risk, and we advise that readers do their independent research before making any financial decisions.
Published At
4/29/2024 5:15:47 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.