On the day before the release of the FOMC and CPI reports by the Federal Reserve, the cryptocurrency market continued to be under pressure.
According to Bitpush data, on Tuesday morning, Bitcoin broke below the support level of $69,500, dropping 5% to around $66,000 support before a slight afternoon rebound, closing above $67,400 at the end of the stock market. At the time of writing, the trading price of Bitcoin was $67,387, with a 3% decrease over 24 hours.
The pullback of Bitcoin intensified the decline of altcoins, with only six out of the top 200 tokens by market value showing gains for the day. Among the best-performing tokens, Ondo (ONDO), Oasis (ROSE), and Stacks (STX) rose by 2.5%, 2.3%, and 1.6% respectively. Meme token cat in a dogs world (MEW) suffered the largest decline, dropping by 18.6%, MANTRA (OM) decreased by 15%, and ConstitutionDAO (PEOPLE) fell by 14.2%.
Currently, the total market value of cryptocurrencies is $2.44 trillion, with Bitcoin’s market dominance rate at 54.4%.
In the US stock market, the market opened under pressure, but gradually recovered after noon. At the close, the Dow Jones Industrial Average initially fell by 120 points or 0.3%, the S&P 500 Index rose by 0.28%, and the Nasdaq rose by 0.88%, the latter two reaching new closing highs. Apple (AAPL.O) surged by 7.2%, reaching a market value close to $3.2 trillion and setting a new high.
Expected to keep interest rates unchanged, with high long positions risk
In response to escalating inflation, senior Democratic Senator Elizabeth Warren wrote to the Federal Reserve urging it to consider cutting interest rates. They believe that the interest rate environment aimed at curbing inflation will increase housing, construction, and car insurance costs, exacerbating the problem and potentially causing the economy to fall into a recession, resulting in “forcing thousands of American workers to be unemployed.”
However, the Fed Watch tool from the Chicago Mercantile Exchange shows a 99.4% probability of interest rates remaining unchanged this month.
Market analyst Bloodgood said, “While no one expects the FOMC to change interest rates, the key is whether the Federal Reserve may cut interest rates in July and September, which is important because the probability of a rate cut at the September 18 Federal Reserve meeting (two rate cuts are close to 5%) and the probability of maintaining rates are close to 50/50. If the Federal Reserve hints at or inflation data affects these possibilities, it will also be reflected in the price chart.”
Secure Digital Markets mentioned, “BTC buy orders are accumulating between $66,000 and $66,500, while sell orders are concentrated between $68,000 and $68,500.”
At the same time, the correlation between Bitcoin and traditional risk assets is higher than usual. Charts released by analyst K33 show that the correlation between Bitcoin and the US stock market has reached the highest level in 18 months, with Bitcoin’s 30-day correlation with the Nasdaq increasing to 0.64 since 2022 for the first time.
They said, “In the past two weeks, bullish traders are currently in a losing position, with 32,000 BTC added to the nominal open contracts since Bitcoin last traded at the current price.”
Waiting for a rebound after the FOMC meeting?
Bloodgood said, “So far, the performance in the second quarter has been unstable, but considering Bitcoin’s seasonal trends over the years, this is not surprising. Typically, the performance in the second and third quarters is much worse than in the first and fourth quarters, which to some extent confirms the popular phrase in the crypto market – ‘sell in May and go away’.”
Bloodgood reminded traders, “However, it should be more accurately stated as ‘sell a bit before May’ because Bitcoin’s performance in May often lags behind the S&P 500 Index, and selling in May makes more sense, regardless, I would like to remind everyone not to overly rely on seasonal trends – especially for an asset class that has experienced multiple significant changes in market dynamics in this relatively short history – this is just one of many data points to consider.”
Regarding Tuesday’s price drop, Bloodgood pointed out, “We found that the BTC price has dropped below the breakout level once again. If you want safety, you have to wait for the weekly closing price. The current trading price of Bitcoin is around $67,000, forming a double top pattern on the weekly chart, which is usually a strong bearish signal.”
He believes that from the daily chart, the next target is the daily support level at $64,650. If Bitcoin tests and successfully breaks through this support level, a strong rebound could be seen. Otherwise, traders may face “a miserable summer.”
MN Trading founder Michaël van de Poppe stated on X platform that he believes the real rebound in the cryptocurrency market will come after the FOMC meeting.
He pointed out, “After the previous FOMC meetings, the market rebounded rapidly, with Ethereum rebounding over 20% multiple times after previous meetings, and Bitcoin also surging by over 20% since the recent Federal Reserve meeting.”
He added that the end of the last Federal Reserve meeting “marked the end of a two-month adjustment period, with Bitcoin quickly rising from $57,000 to an all-time high.”
Market analyst Crypto Mikey, however, is not so optimistic. He emphasized that since March, Bitcoin has been range-bound, showing no signs of breaking higher, warning that “this consolidation range may continue until the Federal Reserve actually cuts interest rates.”
Author: BitpushNews Mary Liu
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