As a crypto investor with some experience in the market, I’m closely monitoring the current downturn in Bitcoin and the broader crypto market. The recent bearish trend is concerning, and the falling prices have triggered panic selling among retail investors. institutional investors are also staying away from risk assets due to rising risks and uncertainty.
The value of Bitcoin has dropped by more than 20% and entered a bear market, marking three straight daily declines this week. This downturn comes as investors prepare for the possibility of the US Federal Reserve scaling back its planned three reductions in interest rates during the year.
As a crypto investor, I’m closely monitoring the economic landscape as concerns about stagflation and stubborn inflation persist. The latest PCE data has confirmed my fears of persistent inflationary pressures, while the Q1 GDP growth rate of 1.6% hints at stagflation – slow economic growth coupled with high inflation. Today’s Fed monetary policy decision and Chair Jerome Powell’s announcement carry significant weight for both the stock and crypto markets. I’m bracing myself for potential market volatility, as investors remain on edge amidst growing fears of a market crash.
Bitcoin Price Falls Over 10% to $56K
The price of Bitcoin dropped more than 10% in a single day due to frenzied selling among individual investors. This selling was likely triggered by institutional investors’ concerns about heightened risks and their subsequent decision to withdraw from risk assets. Currently, Bitcoin is being transacted at approximately $57,000. The lowest and highest prices within the past 24 hours were recorded as $56,555 and $62,121, respectively. Additionally, there has been a significant surge in trading activity over the last day, with volumes up by around 70%.
Bitcoin has experienced a 22% decrease from its peak price of $73,803 in March, causing it to enter a bear market. However, the cryptocurrency has gained 35% since the start of the year and more than doubled compared to its value at the same time last year. This upward trend can be attributed to substantial investment into Bitcoin spot exchange-traded funds (ETFs) since January.
Macro Pressure Mounts
On Wednesday, the US dollar index (DXY) climbed up to approximately 106.4, drawing nearer to six-month peak levels. This advance came as investors prepared for significant monetary policy announcements from the Federal Reserve. The Fed is projected to maintain current interest rates due to robust US economic statistics and persistently high inflation. Nevertheless, market participants are primarily attentive to Fed Chair Jerome Powell’s insights regarding potential rate reductions in 2023.
The 10-year Treasury yield in the United States climbed closer to a six-month peak, reaching 4.67%, following an unexpected increase in US labor costs. This development reinforces the Federal Reserve’s decision to maintain elevated interest rates.
Bitcoin price moves in the opposite direction to DXY and US 10-Yr Treasury yield.
As a research analyst at Fineqia, I explained to Reuters that the current market downtrend is likely due to profit-taking by investors who bought in during previous slumps in 2022 and 2023. Additionally, Exchange Traded Fund (ETF) investors have seen substantial price growth on their shares since entering the market early in 2024, making it a logical time for them to sell and secure their profits.
Over $500 Billion Crypto Liquidation
The total value of the cryptocurrency market dropped from $2.34 trillion to $2.13 trillion, resulting in an additional $210 billion in losses for investors following significant liquidations worth approximately $250 billion over the past few days.
According to Coingeasus data, over $475 million worth of cryptocurrency positions were liquidated during the recent market sell-off. Approximately $420 million of these were long positions, while short positions totaling around $55 million were also terminated.
Approximately 145,000 traders had their positions closed out, with the largest such occurrence happening on the crypto exchange OKX when an individual converted ETH into USD worth around $6.07 million.
According to analyst Michael van de Poppe, experts anticipate a significant Bitcoin price surge starting around the $48,000 mark. However, large-scale Bitcoin holders (whales) may influence the beginning of this rally closer to the $54,000 level. The complete market recovery might not initiate until after May 31st, when Bitcoin options expiry takes place.
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2024-05-01 13:22