As Bitcoin continued to range between $60,000 and $65,000, the cryptocurrency market experienced a downturn at the end of the week.
The May Consumer Reports from the University of Michigan fell short of expectations, with broader consumer indicators reaching their lowest level in six months. The report revealed that inflation expectations for the next year rose from 3.2% to 3.5%, still at a relatively high level compared to pre-pandemic levels.
The Federal Reserve seems to be in a dilemma, trying to navigate between adjusting to economic slowdown and combating rising inflation expectations. Following the release of the report, risk assets flattened.
According to Bitpush data, Bitcoin experienced a significant sell-off near midday on Friday, dropping from $63,000 to a low of $60,155, and has since been consolidating below $61,000.
At the time of writing this article, the BTC trading price was $60,500, down 3.45% in the past 24 hours.
Among the top 200 cryptocurrencies by market capitalization, only 20 saw gains, while the rest experienced losses. AKT performed the best, rising 14.6% with a trading price of $5.93, followed by JTO with a 6.4% increase and ZETA with a 5.3% increase. SSV had the largest decline, falling 17.5%, followed by MEW with an 11.6% decline and AIOZ with an 8.2% decline.
The total market capitalization of cryptocurrencies is currently $2.25 trillion, with Bitcoin’s dominance rate at 53.2%.
The stock market saw mixed results, with the Dow Jones Industrial Average rising for the eighth consecutive trading day, closing up 0.32%, while the S&P 500 rose 0.16% and the Nasdaq Composite remained unchanged.
Bitcoin is in a “boring to death” phase, according to Charles Edwards, founder of Capriole Investment, a cryptocurrency hedge fund. He explained that this consolidation period could last from one to six months, during which Bitcoin will fluctuate within a low volatility range until market participants lose patience. He added that the sentiment in the market will be most negative before the consolidation ends.
Chris Yin, CEO and co-founder of Plume Network, stated that Bitcoin is likely to continue to decline for some time, which is natural after the Bitcoin halving and several months of price increases. He attributed this to the excessive expectations for interest rate cuts, global macro instability, and the enforcement actions taken by SEC Chairman Gensler in the cryptocurrency field.
Yin emphasized the importance of the macro environment, stating that investors are waiting for economic data improvements and signals for rate cuts. He also mentioned the upcoming U.S. presidential election in November, which will be an important indicator as the Trump administration has expressed positive views on cryptocurrencies while the Biden administration has shown a negative stance.
Santiment, an analytics firm, suggested that the bottom may be near, as traders have shown interest in buying Bitcoin on dips. They noted that lack of confidence among the crowd is a strong signal that the price is approaching the bottom.
Bitfinex analysts stated in a report on Friday that Bitcoin’s recent weakness occurred against the backdrop of a strong U.S. dollar and diminished expectations for interest rate cuts, and that this calmness may continue until early summer. They expect uncertainty to persist in the short term in a low volatility environment until the actual reduction of Quantitative Tightening (QT) in June.
The Federal Reserve announced plans to slow down the pace of asset purchases starting next month, which will impact the liquidity of the U.S. dollar and benefit risk assets like cryptocurrencies that are sensitive to global liquidity conditions. The report from Bitfinex stated that the continued strength of Bitcoin and the recovery of the low point range, along with the simultaneous weakness of the U.S. dollar, are new signs that will prepare them for a very bullish Bitcoin in the third and fourth quarters.
Author: BitpushNews Mary Liu