Article Title: “Market Continues to Consolidate, Waiting for Fed Rate Cut Guidance”
Author: Mary Liu, BitpushNews
Investors are awaiting the Federal Reserve’s upcoming interest rate decision and May’s Consumer Price Index (CPI) release as the crypto market opened lower this week.
According to Bitpush data, Bitcoin initially surged past the $70,000 mark, reaching a high of $70,195 in the early session before falling back in the afternoon to around $69,600 support level.
Altcoins experienced mixed movements, with Polymesh (POLYX) leading the top 200 tokens by market cap, gaining 9.7%. This was followed by Gnosis (GNO) with an 8.6% increase, and Livepeer (LPT) with a 5.5% rise. On the other hand, Wormhole (W) led the losses with a decrease of 18%, followed by Biconomy (BICO) down by 17.1%, and Echelon Prime (PRIME) dropping by 10%.
The total market capitalization of cryptocurrencies currently stands at $2.53 trillion, with Bitcoin holding a dominance of 54.1%.
As of the Monday closing, the S&P 500, Dow Jones, and Nasdaq indices all rose by 0.26%, 0.18%, and 0.35% respectively.
The FedWatch tool from the Chicago Mercantile Exchange indicates a decrease in market expectations for a Fed rate cut in September, dropping from 60% a week ago to 49%.
ETF inflows continue to rise, with $131 million flowing into ETF products on Friday, marking the 19th consecutive day of inflows.
A report from CoinShares revealed that $1.83 billion entered the U.S.-listed spot BTC ETF last week, contributing to a net inflow of $2 billion for globally listed digital asset investment products. The total inflow over the past five weeks reached $4.3 billion, allowing the total assets under management to surpass $100 billion for the first time since March.
Cryptocurrency analyst Timothy Peterson on the X platform suggested that if the current pace of inflows into spot BTC ETFs continues, BTC could reach a new all-time high by July 31. Moreover, with the current liquidity trend, BTC’s price could reach $135,000 by the end of the year.
Short-term leverage surges
Contrary to this view, analysts at Bitfinex expressed concern that despite the recent influx of ETF funds over the past 20 trading days, it may not be sufficient to drive further price increases or surpass BTC’s range high in the short term. Traders are engaging in basic arbitrage trading by holding long spot positions and short perpetual futures for hedging purposes.
BTC and altcoin open interest (OI) in futures contracts have remained high, as shown in the graph above. Coinglass data indicates that BTC OI on major exchanges hit a record high of $36.8 billion on June 6. Despite a price pullback on Friday, the OI remains above $36 billion.
Analysts believe that the recent dip on Friday was more of a “leverage washout” scenario, where a significant number of leveraged long positions in altcoins (and to some extent major currencies) were liquidated, neutralizing the funding rate. Although the liquidation of leveraged positions in altcoins was severe, a significant drop is not expected to occur immediately.
On June 7, over $360 million in long positions were liquidated in the crypto market, with a total liquidation amount exceeding $410 million, the highest level since April 14. However, only $50 million in long liquidations came from BTC.
Analysts explained that most of these liquidations were in altcoins, explaining the substantial decline in altcoins compared to major currencies last week. This type of liquidation event typically does not trigger further significant declines, making this week crucial as the Consumer Price Index inflation report set to be released on June 12 is expected to be a major market catalyst. With derivative positions increasing again, prices are likely to continue fluctuating in a tense environment.
Bitfinex believes that maintaining the local lows for BTC around $68,000-$68,500 is crucial for bulls in the current environment, as failure to break above the range highs will further pressure the bulls.
Regarding the Fed’s monetary policy, Bitfinex analysts stated that long-term high-interest rates are a double-edged sword that requires careful management:
On one hand, the strength and adaptability of the U.S. economy allow it to thrive even in a high-interest rate environment, thanks to robust labor demand and rising wages. This situation will support continued economic growth, stable consumer spending, and overall economic resilience.
On the other hand, prolonged high-interest rates pose significant risks that could hinder economic activity, leading to reduced investment, slower job growth, and a potential economic downturn.
Analysts also noted that recent rate cuts by the European Central Bank and the Bank of Canada were aimed at shifting towards looser monetary policies to stimulate economic growth. This suggests that the Federal Reserve may need to reassess its monetary policy, with actions from its global counterparts potentially influencing its decisions in the coming months, especially if inflation trends and economic conditions require a shift.
