The Federal Reserve announced on Wednesday that it will maintain interest rates, which aligns with market expectations. While the central bank indicated a continued inclination to eventually lower borrowing costs, it also issued a warning regarding recent disappointing inflation data. This suggests that interest rates may remain stable for a period of time as progress towards the Fed’s 2% inflation target has stalled, reducing the likelihood of a near-term rate cut and placing the pace of rate cuts in a “holding pattern”.
Fed Chairman Jerome Powell stated in a press conference that policymakers need “greater confidence” than initially expected to achieve the necessary conditions for a rate cut. He said, “Inflation remains elevated and it’s not clear that we have made further progress in reducing its impact.”
Bitcoin and the cryptocurrency market experienced another roller-coaster ride. BTC briefly fell by 7% in early Wednesday trading, dropping from $60,775 to a daily low of $56,500. It consolidated prior to the rate decision announcement and rebounded to above $58,000 after Powell’s speech. However, it fell again and was trading at $57,700 with a 4% decline in the past 24 hours.
The altcoin market saw gains during the closing period, with about a quarter of the top 200 tokens experiencing losses while the rest saw minor increases. ZetaChain (ZETA) led for the second consecutive day with a 14.9% increase, followed by Optimism (OP) with an 11.3% rise, and Polkadot (DOT) with a 10.6% increase. Radix (XRD) experienced the largest decline, falling by 9.7%, followed by Arweave (AR) with a 9.3% decrease, and Golem (GLM) with a 7.1% drop.
The current overall market capitalization of cryptocurrencies is $2.15 trillion, with Bitcoin’s dominance at 52.3%.
Standard Chartered: BTC May Fall to $50,000
Investment bank Standard Chartered stated in an email commentary on Wednesday that Bitcoin has breached the technical level of $60,000, paving the way for further decline to the range of $50,000 to $52,000.
The bank noted that the US-listed Bitcoin exchange-traded funds (ETFs) have seen continuous outflows for five days, with the BTC trading price falling below the average ETF purchase price of around $58,000. Analyst Geoff Kendrick wrote, “This means that over half of the ETF positions are underwater, so the risk of liquidation of some of these positions must also be considered.”
The bank stated that the driving factors behind the price decline seem to be a combination of cryptocurrency-specific factors and macro influences, with risk assets like cryptocurrencies relying on liquidity facing increasing macro headwinds. The report pointed out that broader liquidity measures in the US have deteriorated sharply since mid-April.
However, Standard Chartered suggested that investors could buy Bitcoin on dips if it falls to the range of $50,000 to $52,000 or if the US Consumer Price Index (a measure of inflation) shows a “friendly” performance.
Macroeconomic Pressure Limits Upside
Secure Digital Markets analysts stated, “With ongoing macroeconomic pressures, the bearish momentum has intensified, pushing Bitcoin below the key support level of $60,000. Bitcoin has recently dropped to $56,700, breaking below the $57,000 mark for the first time since February 28 and recording its first monthly decline since August.”
They pointed out that this 16% drop is the largest decline since the November 2022 FTX crash. The current immediate support level hovers between $50,000 and $53,000. The crypto market is showing signs of fatigue due to the expectation of a smaller interest rate cut and continued outflows from US BTC ETFs.
Analysts stated that the expectation of a long path to rate cuts with the Fed maintaining stable interest rates further unsettles the market. Additionally, the significant outflow of funds from spot BTC ETFs has led to weakened liquidity, with net withdrawals for spot BTC ETFs occurring for the fifth consecutive week, totaling $635 million.
They added, “Altcoins, especially those in recently performing categories such as AI tokens and meme coins, have suffered losses. The stock market has also been hit hard, with the S&P 500 and NASDAQ indices both falling over 4% in April, and the Dow Jones index declining 5%, marking its worst monthly performance since September 2022.”
In conclusion, they stated, “Current futures market betting probabilities show a likelihood of around 50% for rate cuts by September, with an expected 25 basis point cut by the end of 2024.”
Experienced cryptocurrency traders view this adjustment as a routine correction within a bull market cycle.
Market analyst Rekt Capital stated, “While seeing Bitcoin price pullbacks and/or sideways consolidations can be painful… this is what this cycle needs to resync with historical price norms and traditional halving cycles, the longer it lasts, the better.”
Real Vision founder Raoul Pal noted that this is the fourth 20% pullback in the past 12 months, calling it a “very normal thing”.
After several days of selling pressure, the overall sentiment in the crypto market has been affected, with Alternative data showing that it has shifted from being “greedy” or “extremely greedy” after being in that state for the past month to now being “neutral”.
Author: BitpushNews Mary Liu
