Bitcoin Price Tumbles Amid Market Uncertainties and Mixed Global Sentiment
Summary:
The price of Bitcoin (BTC) experienced a significant drop in late April, leading to the liquidation of $172 million in leveraged long positions. This comes amidst investor anticipation around the Federal Reserve Chair’s closing remarks at a monetary council convention, and uncertainties over U.S. government expenditures. Bitcoin miners hold their ground despite experiencing a 50% drop in their rewards. Meanwhile, China sees an increase in demand for the USD Coin (USDC), indicating a positive sentiment towards cryptocurrencies in the country. Despite this, there have been significant outflows from U.S-listed spot ETFs, suggesting an uncertain future for Bitcoin's price.
The value of Bitcoin (BTC) experienced a substantial plunge during the transition from April to May, with a fall of 11.5%, bringing it down to $56,522. This drop instigated the liquidation of leveraged long positions valued at $172 million. Notably, this figure seems trivial compared to the BTC futures open interest of $28.9 billion prior to the slump. Thus, it's an oversimplification to assert that the price tumble caught bullish investors off guard.
Many market observers consider the fluctuations to be due to the anticipation around Federal Reserve Chair Jerome Powell's closing speech after the two-day monetary council convention on May 1. While it's a general consensus that the Federal interest rates are likely to remain at 5.25%, there is a prevalent uncertainty about the US Treasury Department's capacity to finance governmental spending.
On the last day of April, the U.S. Treasury 2-Year note yield soared to a five-month high of 5.06%. This surge was a result of investors seeking greater returns to balance the heightened risk announced with the $1.07 trillion budget deficit for H1 2024. Given the hike in interest rates by the Fed in 2023, the interest expenses on the deficit have grown by 23% for H1 2024 and are predicted to continue growing as long as the rates remain high.
Bitcoin's decline is not unique, as deteriorating macroeconomic conditions are driving cautious behaviour amongst investors. The Russell 2000 Index (RTY) traced a decreasing trajectory, with a fall of 8.2% in the past month, eliminating previous two month's gains. WTI oil prices also followed suit, dropping by 8.3% since the $87.91 high that was achieved on April 5.
The Bitcoin price correction seems to be concluding according to signs from the traditional sectors, following strong Q1 corporate earnings reports from industry giants like Amazon, Microsoft, Google, Netflix, TSMC, Samsung, Coca-Cola, Morgan Stanley, Citigroup, HSBC and Barclays. If the Fed decides to sustain increased rates, traders might start seeking alternatives, despite the current recuperation in the stock market pulling away focus from risky assets like Bitcoin.
Bitcoin miners have been feeling the pressure post the April 20 halving event, which slashed their rewards to 3.125 BTC per block, a 50% drop. However, CryptoQuant’s CEO, Ki Young Ju, has noted that miners' exchange outflows show no signs of surrender yet. A consistent downtrend in Bitcoin's price for weeks could however push the larger miners to sell off a significant amount of their Bitcoin holdings.
Despite a significant hash rate index decrease of 57%, miner staunchness is another indicator of the probable end of Bitcoin's downturn. Miners appear resistant to selling their assets, according to a report by Luxor Technology.
Examining China's stablecoin demand, particularly for the USD Coin (USDC), may shed light on the overall sentiment in the crypto market. The 2.7% premium increase on Chinese USDC transactions on May 1 implies a strong demand for the USDC, indicating a positive sentiment towards cryptocurrencies in China.
However, despite this optimistic scenario, net outflows from U.S.-listed spot ETFs have totalled $635 million in the past five trading days, implying that investment flows hold significant sway in Bitcoin's price action. Thus, it seems uncertain whether the $56,500 support level will withstand.
This article does not provide investment advice or suggestions. Investing and trading involve substantial risks, and readers are advised to undertake their own research before making any decisions.
Published At
5/1/2024 10:45:46 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.