Bitcoin’s price is down 4.7% from yesterday’s high of $71,231, currently hovering around $66,967. This decline marks a noticeable return of market volatility, which is driven by several key factors.
No. 1 Waiting for the Federal Reserve FOMC meeting
The Bitcoin market appears to be in risk-off mode ahead of tomorrow’s Federal Open Market Committee (FOMC) meeting on Wednesday, June 12. The market’s sensitivity to macroeconomic indicators is on full display as stakeholders await the US Federal Reserve’s interest rate decision and its economic projections.
Current expectations suggest the Fed will maintain interest rates in the 5.25%-5.50% range, but the market is bracing for an updated scatter chart that is projected to adopt a more hawkish stance. The projected adjustment is to reduce the expected rate cuts in 2024 from three to two, with some speculating about the possibility of only one cut. This hawkish tilt in monetary policy projections could significantly impact investor behavior, as higher interest rates tend to dampen the attractiveness of low-yield assets such as cryptocurrencies.
The uncertainty is deepened by the fact that a few hours before the FOMC announcement, data on the US Consumer Price Index (CPI) for May 2024 will be published. The market has reacted strongly to US macroeconomic data in recent months and any deviation from expectations may result in significant price fluctuations.
Crypto Analyst Ted commented on X, noting the critical nature of this week’s events: “After last Friday’s strong employment data, markets have almost completely priced in the July interest rate cut. Powell could change that quickly on Wednesday, especially if the CPI falls. There is a (off) chance of a significant sell-off this week, which could move BTC + cryptocurrencies…”
#2 Increased pressure on spot sales
The immediate catalyst for the recent price decline appears to be the keen augment in spot sales. Analysis with alpha dōjō discovers Massive selling pressure was largely responsible for the decline to a low of $67,000. The market dynamics observed during this period indicate a clear change, with increased volume of sell orders not being covered by sufficient buy orders to maintain price levels. This imbalance led to a breach of the previously considered solid support zone around $68,000.
Analysts described the situation as follows: “Volatility has returned, and BTC has fallen by as much as 3.5% since yesterday to a low of 67,000. dollars. This sell-off was mainly driven by strong spot selling pressure, which is quite negative. The main problem is the lack of liquidation during the sale period. BTC is currently in a critical area; the structure of the day was broken. BTC needs to rebound here, otherwise it’s very likely we’ll go back to the lower 60k. dollars.”
#3 The streak of inflows in Bitcoin cash ETF funds is ending
The investment dynamics in spot Bitcoin ETFs also reflect the market’s bearish turn. After 19 consecutive days of positive inflows, these funds have seen significant growth outflows yesterday with a total value of $64.9 million. Notable among them was the Grayscale Bitcoin Trust, which generated $39.5 million. BlackRock, on the other hand, recorded smaller inflows of $6.3 million.
The performance of other ETF providers has shown considerable variation. Fidelity recorded outflows of $3 million, while Bitwise recorded inflows of $7.6 million. In contrast, Invesco reported outflows of $20.5 million, and Valkyrie also reported outflows totaling $15.8 million.
At the time of publication, the price of BTC was $66,967.
Featured image created with DALL·E, chart from TradingView.com
