On the day before the release of the Federal Reserve FOMC and CPI reports, the crypto market continued to be under downward pressure.
According to Bitpush data, Bitcoin lost the support level of $69,500 on Tuesday morning, and after falling 5% to the support level near $66,000, it rebounded slightly in the afternoon and climbed back above $67,400 at the close of the U.S. stock market. As of press time, the trading price of Bitcoin was $67,387, a 24-hour drop of 3%.
Bitcoin’s pullback exacerbated the decline of Altcoin , with only six of the top 200 tokens by market value rising that day.
The best performing coins all rose less than 3%, with Ondo (ONDO), Oasis (ROSE), and Stacks (STX) rising 2.5%, 2.3%, and 1.6%, respectively. Meme token cat in a dogs world (MEW) fell the most, down 18.6%, MANTRA (OM) fell 15%, and ConstitutionDAO (PEOPLE) fell 14.2%.
The current overall cryptocurrency market capitalization is $2.44 trillion, and Bitcoin’s market dominance is 54.4%.
As for the US stock market, the stock market fell under pressure at the opening, and gradually recovered after the midday. At the close, the Dow Jones Industrial Average initially closed down 120 points or 0.3%, the S&P 500 rose 0.28%, and the Nasdaq rose 0.88%, the latter two hitting new closing highs. Apple (AAPL.O) rose 7.2%, with a market value of nearly $3.2 trillion and a new high.
Long exposure is high as interest rates are expected to remain unchanged
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 a rate hike environment aimed at curbing inflation will exacerbate the problem by pushing up housing, construction and auto insurance costs and could potentially tip the economy into a recession, "forcing tens of thousands of American workers out of work."
Still, the CME Group’s Fed Watch tool shows there is a 99.4% chance that rates will remain unchanged this month.
Market analyst Bloodgood said: "While no one expects the FOMC to change interest rates, the key is whether the Fed is likely to cut interest rates in July and September. This is important because the probability of a rate cut at the September 18 Fed meeting (the probability of two rate cuts is close to 5%) and the probability of keeping interest rates unchanged are close to 50/50. If there are any hints from the Fed or inflation data that affect these probabilities, it will also be shown on the price chart ."
“BTC buy orders are accumulating between $66,000 and $66,500, while sell orders are also concentrated between $ 68,000 and $68,500,” Secure Digital Markets said.
At the same time, Bitcoin is more correlated with traditional risk assets than usual. A chart released by K33 analysts shows that Bitcoin's correlation with the U.S. stock market has reached its highest level in 18 months, and last week the 30-day correlation coefficient between Bitcoin and Nasdaq increased to 0.64 for the first time since 2022.
“Traders who were bullish over the past two weeks are currently in the red, with notional open interest having increased by 32,000 BTC since Bitcoin last traded at current prices,” they said.
Will the rebound wait until after the FOMC meeting?
“The second quarter has been volatile so far, but that’s not surprising given Bitcoin’s seasonality over the years,” Bloodgood said. “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 reminded traders: “However, to be precise, it should be ‘sell a little before May’, because BTC tends to perform worse than the S&P 500 in May, and selling in May makes more sense. Regardless, I would like to remind everyone not to over-emphasize seasonal trends - especially for an asset class that has appeared for a relatively short time and market dynamics have changed dramatically many times in this short history - it is just one of many data points to consider.”
Commenting on Tuesday’s price drop, Bloodgood noted: “We see that BTC price has fallen below the breakout level, which is another false breakout. If you want to be safe, wait for the weekly close. Currently Bitcoin is trading around $67,000, printing 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 of $64,650. If BTC tests and successfully breaks through this support level, it is expected to see a strong rebound. Otherwise, traders may have "a miserable summer."
Michaël van de Poppe, founder of MN Trading, said on the X platform that he believes the real rebound in the cryptocurrency market will come after the FOMC meeting.
He noted: “Markets have rallied quickly following previous FOMC meetings, with Ethereum rallying 20% multiple times following previous meetings, and Bitcoin also surging over 20% since the Fed’s most recent meeting.”
He added that the end of the last Fed meeting “marked the end of the correction two months later, with Bitcoin swiftly surging from $57,000 to all-time highs.”
Market analyst Crypto Mikey is less optimistic. He stressed that Bitcoin has been range-bound since March and has shown no signs of breaking out higher. He warned: "This consolidation range may continue until the Fed actually cuts interest rates."
Author: BitpushNews Mary Liu
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