Today’s Bitcoin dip is influenced by anticipation of the Federal Reserve’s hawkish rate decision and significant long position liquidations.
The price of Bitcoin has been retreating from its record high of around $73,800 for over a month, and its performance on May 1 is no different.
BTC’s price declined by over 7% intraday to around $56,550, its lowest level since February. The cryptocurrency has now declined approximately 23.40% from its record high, signaling a potential shift in market sentiment as more traders begin to lock in profits, possibly in anticipation of a bearish reversal.
FOMC session hurts crypto sector
Bitcoin’s price dropped on May 1, primarily in anticipation of the Federal Reserve’s interest rate decision later that day, with investors also eyeing the U.S. central bank chairman Jerome Powell’s subsequent press conference.
During his last address, Powell highlighted the ongoing struggle with fighting inflation. Given the latest economic indicators and expectations for a strong employment report on April 26, he will unlikely alter his stance in the upcoming remarks.
Anticipations of a prolonged high-interest rate environment have pushed the yield on the benchmark U.S. 10-year Treasury note to 4.69% on May 1, up from 4.60% the previous day.
These elevated yields have diminished the appeal of non-yielding assets like Bitcoin, reflecting a consistent market response observed ahead of Federal Reserve meetings earlier this year.
Bitcoin ETF outflows continue
The de-risking sentiment is visible further across the spot Bitcoin exchange-traded funds (ETFs), where investors have been withdrawing their capital for days.
As of April 30, these ETFs held about $1.178 billion cumulatively, down about 10% from their local peak of $1.295 billion a week ago. Grayscale’s GBTC fund witnessed the maximum outflow in the said period, primarily due to its higher-fee structure.
Nonetheless, inflows into other Bitcoin ETFs have slowed down recently, with BlackRock’s iShares Bitcoin Trust (IBIT) at a standstill since April 24, when the U.S. released its disappointing gross domestic product (GDP) and elevated inflation report.
“Usually the BlackRock ETF was one of the most consistent with inflows,” noted independent market analyst Tasy, adding that it “is not a good sign” for the Bitcoin market.
BTC longs rekt
The broader liquidation of long positions versus the short ones has further fueled Bitcoin’s underperformance today.
Notably, the Bitcoin derivatives market has witnessed over $166 million worth of liquidations in the last 24 hours, out of which $145.35 million were long. When long positions are liquidated, it generally involves selling off the asset (voluntarily or by the broker), which can drive the price down further.
Bitcoin’s open interest (OI) has stabilized around $30 billion but remains lower compared to its 2024 peak of around $39.30 billion.
Meanwhile, the cryptocurrency’s funding rate is around 0.165% per week, showing the interest longs are ready to pay short to keep their positions open. Still, the funding rate has dropped significantly compared to its 2024 peak of over 2% per week.
The substantial drop in the funding rate and a reduced open interest from its peak might suggest a reduction in speculative trading or a decrease in overall market confidence.
It could also reflect a shift in trader expectations about future price movements, possibly anticipating less volatility or fewer strong upward price movements.
BTC price descending triangle breaks down
From a technical perspective, Bitcoin’s price decline today is part of a broader correction that started after testing a key falling trendline resistance. Furthermore, this resistance appears to be the upper trendline of Bitcoin’s prevailing descending triangle pattern when viewed alongside its horizontal trendline support (the lower trendline).
As of May 1, BTC’s price was breaching the lower trendline of the descending triangle, accompanied by a rise in trading volumes, signaling the activation of the descending triangle breakdown scenario.
According to this setup, following the trendline breach, the price could decline by an amount equivalent to the triangle’s maximum height, potentially steering BTC towards a target of $50,000 by the end of June.
Source: Cointelegraph.com
