Last week, Federal Reserve Chairman Powell emphasized in his speech that the Fed hopes to lower interest rates only after having more confidence in the inflation trend. The strong labor market conditions mean that there is currently no urgency to cut interest rates. Has the convergence of interest rate cuts become the cause of Bitcoin’s recent decline?
(Background:
Bitcoin plummeted this morning, “dropping to $66,000”, with 150,000 people on the entire network liquidating $470 million.
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(Background supplement:
On the first day of listing, 940 broke through “700,000 investors mourn”, netizens laughed: “Better buy Bitcoin!”
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Table of Contents:
Traders reduce bets on interest rate cuts
Holiday leads to decreased liquidity
The goal of “smart money” is to buy at lows around $62,000
BTC is expected to surge to $150,000 after halving
On the first trading day of the second quarter, the S&P 500 index and the Dow Jones Industrial Average both declined as investors reduced their bets on interest rate cuts for this year based on new economic data in the United States. The S&P closed down 0.2%, the Dow Jones fell 0.6%, and the Nasdaq Composite index rose slightly by 0.1%.
The overall cryptocurrency market declined, with Bitcoin almost testing the key support level of $68,000. It fell to $68,089.00 at one point during the day and remained below $70,000 during the US stock market closing period, with a 24-hour decrease of 1.8%. Ethereum (ETH) fell by 1.54% and dropped below $3,600. XRP fell by 2.36% and ADA fell by 2.63%. According to Coinglass data, the total liquidation amount in the cryptocurrency market in the past 24 hours reached $316 million, with the majority being long positions, totaling $257 million.
The biggest data point affecting the market today is the ISM Manufacturing Index, which rose 2.5% to 50.3% in March, exceeding all economists’ expectations. A reading above 50% indicates that manufacturing managers believe the manufacturing market is expanding.
Driven by this data, the US dollar index (DXY) broke through 105 for the first time since November 2023, rising 0.49% during the day. The yield on the US 10-year Treasury bonds reached a two-week high, rising 13.1 basis points to 4.325%.
ISM reports are not government data included in quarterly economic growth data from the Commerce Department. However, they are closely watched by investors. Despite higher interest rates in recent years, investors believe that this data indicates good economic performance and that the Federal Reserve may not need to cut interest rates to help the economy. Bond traders currently price the probability of an interest rate cut in June 2024 at less than 50%. This is a shock to the market, as investors originally expected as many as six interest rate cuts.
Last week, Federal Reserve Chairman Powell emphasized in his speech that the Fed hopes to lower interest rates only after having more confidence in the inflation trend. The strong labor market conditions mean that there is currently no urgency to cut interest rates.
Well-known trader Daan Crypto Trades suggested that the Easter holiday may be a factor in the market’s recent pullback.
He stated on the X platform: “Apart from some ETH and other small token quantities, Grayscale has not released any data yet, which may be due to the market being closed around Easter. It is expected that the usual inflow/outflow will reappear starting tomorrow.”
Meanwhile, BTC/USD is currently at its lowest level since March 25. Daan Crypto Trades believes that breaking below the 200-period moving average within the 4-hour time frame (currently at $67,330) is not impossible. He said, “The price is testing the 4H/1D trend here, and there is more of a retesting until the price returns above $70,000.”
At the same time, trading firm QCP Capital warned in its latest “New York Color” update sent to its Telegram channel subscribers that there has been an increase in “selling pressure” in the cryptocurrency spot market. The company stated, “In the past 24 hours, we have seen a strong interest in selling bullish options and buying bearish options for BTC and ETH.”
By tracking Binance’s order book liquidity, Material Indicators has depicted a price trend chart for BTC from now until the upcoming block subsidy halving.
In a series of posts, Material Indicators co-founder Keith Alan stated, “Although Bitcoin has closed in the green for the seventh consecutive month in its history, the halving does not guarantee a ‘sole increase’. Smart Money has lowered its bid to $62,000.”
Alan continued to say that Bitcoin may pose problems for institutional buyers due to price volatility in relatively unknown territory. However, once the halving is over, people will firmly believe in new all-time highs.
He commented, “At least one entity believes that this possibility is high, as after the BTC price briefly fell below $69,000, they lowered their target price for BTC long positions to $62,000. This indicates that even institutional players are uncertain about where the price will fall, so they are happy to hold DCA positions in this range, as people strongly believe that new ATH will occur after the halving.”
Morgan Creek Capital CEO Mark Yusko, in an interview with CNBC, stated that although the price of Bitcoin is still below last month’s all-time high, based on its historical performance, the price of Bitcoin after the halving could surge to $150,000.
He analyzed, “Major moves happen after the halving, and by the end of the year, its trajectory will become more…parabolic. And historically, about nine months after the halving, so sometime around Thanksgiving, Christmas, we will see the peak of the price before the next bear market.”
As for Morgan Creek Capital’s strategy for the bull market, Yusko revealed that they have allocated 80% of their portfolio to private equity and 20% to high liquidity tokens, with a focus on Ethereum (ETH), Solana (SOL), and Avalanche (AVAX).
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