Authored by Mary Liu from BitpushNews, the crypto market continued to face downward pressure ahead of the release of the FOMC and CPI reports.
According to data from Bitpush, on Tuesday morning, Bitcoin fell below the $69,500 support level, dropping 5% to around $66,000 before seeing a slight afternoon rebound and climbing back above $67,400 by the close of the stock market. At the time of writing, the trading price of Bitcoin was $67,387, with a 3% decrease in the past 24 hours.
The pullback in Bitcoin intensified the slump in altcoins, with only six of the top 200 tokens by market value experiencing gains. The best-performing tokens saw increases of less than 3%, with Ondo (ONDO), Oasis (ROSE), and Stacks (STX) rising by 2.5%, 2.3%, and 1.6% respectively. Meme token cat in a dogs world (MEW) experienced the largest decline, dropping by 18.6%, followed by MANTRA (OM) down 15% and ConstitutionDAO (PEOPLE) down 14.2%.
The total cryptocurrency market value currently stands at $2.44 trillion, with Bitcoin’s market dominance at 54.4%.
In the stock market, there was downward pressure at the opening bell, followed by a gradual recovery after midday. By the closing bell, the Dow Jones Industrial Average fell by 120 points or 0.3%, while the S&P 500 Index rose by 0.28% and the Nasdaq rose by 0.88%, with both reaching new closing highs. Apple (AAPL.O) surged by 7.2%, nearing a market value of $3.2 trillion and setting a new record.
Expectedly, interest rates are expected to remain unchanged, with high bullish risk exposure. In response to rising inflation, senior Democratic Senator Elizabeth Warren wrote to the Federal Reserve urging them to consider cutting interest rates. They believe that the environment of rate hikes aimed at curbing inflation will increase housing, construction, and car insurance costs, exacerbating issues and potentially leading to an economic downturn, forcing thousands of American workers to lose their jobs.
Despite this, the Fed Watch tool from the Chicago Mercantile Exchange shows a 99.4% probability of interest rates remaining unchanged this month.
Market analyst Bloodgood stated, “While no one expects the FOMC to change rates, the key is whether the Fed might cut rates in July and September, which is important because the likelihood of a rate cut at the Fed meeting on September 18 (a 5% chance of two rate cuts) and the likelihood of keeping rates unchanged are close to 50/50. Any hints from the Fed or inflation data affecting these probabilities will also be reflected in price trends.”
Secure Digital Markets noted, “BTC buy orders are accumulating between $66,000 and $66,500, while sell orders are concentrated between $68,000 and $68,500.”
Simultaneously, the correlation between Bitcoin and traditional risk assets is higher than usual. Charts released by K 33 analysts show that the correlation between Bitcoin and the US stock market has reached its highest level in 18 months, with Bitcoin’s 30-day correlation with the Nasdaq increasing to 0.64 for the first time since 2022.
They stated, “Over the past two weeks, bullish traders are currently in a loss position, with nominal open interest contracts increasing by 32,000 BTC since Bitcoin last traded at its current price.”
Will there be a rebound after the FOMC meeting? Bloodgood suggested, “So far, the second quarter has been unstable, but considering Bitcoin’s seasonal trends over the years, this is not surprising. Typically, the second and third quarters perform much worse than the first and fourth quarters, which somewhat confirms the popular saying in the crypto market – ‘sell in May and go away’.”
Bloodgood cautioned traders, “However, it should be more accurately stated as ‘sell a bit before May’, as Bitcoin’s performance in May often lags behind the S&P 500 Index, and selling in May makes more sense. Nonetheless, I would like to remind everyone not to overly rely on seasonal trends – especially for an asset class that has experienced significant changes multiple times in its relatively short history – this is just one of many data points to consider.”
Referring to the price drop on Tuesday, Bloodgood pointed out, “We have found that the BTC price has fallen below a breakout level, marking another false breakout. If you want safety, you have to wait for the weekly closing price. Currently, Bitcoin is trading at around $67,000, forming a double top pattern on the weekly chart, which is typically a strong bearish signal.”
He believed that based on the daily chart, the next target is the daily support level of $64,650 and if Bitcoin tests and successfully breaks through that support, a strong rebound could be expected. Otherwise, traders might face “a miserable summer.”
Founder of MN Trading, Michaël van de Poppe, expressed on X platform that he believes the true rebound in the cryptocurrency market will come after the FOMC meeting ends.
He noted, “After the previous FOMC meetings, the market quickly rebounded, with Ethereum seeing multiple 20% rebounds after previous meetings, and Bitcoin has also surged by over 20% since the recent Fed meeting.”
He added that the conclusion of the last Fed meeting “marked the end of a two-month adjustment period, with Bitcoin quickly soaring from $57,000 to its all-time high.”
Market analyst Crypto Mikey, however, was less optimistic, emphasizing that since March, Bitcoin has been range-bound, without any signs of a breakout to the upside, warning that “this consolidation phase may continue until the Fed actually cuts rates.”
