The price of bitcoin has fallen 4.7% since hitting a high of $71,231 yesterday, and is now hovering around $66,967. This drop marks a notable return of volatility in the market, driven by several critical factors.
Federal Reserve FOMC Meeting Preview Number One
The bitcoin market appears to be in risk-off mode ahead of tomorrow's Federal Open Market Committee (FOMC) meeting, Wednesday, June 12. The market's sensitivity to macroeconomic indicators is on display as stakeholders await the US Federal Reserve's decision on interest rates and its economic projections.
Current expectations suggest that the Federal Reserve will keep interest rates in a range of 5.25%-5.50%, but the market is preparing for the updated dot chart that is expected to take a more hawkish stance. The planned adjustment involves reducing the rate cuts planned in 2024 from three to two, with some speculating on the possibility of a single cut. This hawkish tilt in monetary policy projections is set to significantly influence investor behavior as higher interest rates typically reduce the attractiveness of non-yielding assets like cryptocurrencies.
Adding to the uncertainty, US Consumer Price Index (CPI) data for May 2024 is scheduled to be released just hours before the FOMC announcement. The market has reacted strongly to US macroeconomic data in recent months and any deviation from expectations could lead to substantial price fluctuations.
Related reading
Ted, crypto analyst x.com/tedtalksmacro/status/1800442882744275428″ target=”_blank” rel=”nofollow”>commented on Powell could change this quickly on Wednesday, especially if the CPI declines. There is a (impossible) chance of significant price changes this week, which could move btc + crypto…”
#2 Intensifying spot selling pressure
The immediate catalyst for the recent price drop appears to be an increase in spot sales. Alpha dōjō analysis x.com/alphadojo_net/status/1800468337903735021″ target=”_blank” rel=”nofollow”>reveals That heavy selling pressure was largely responsible for the drop to a low of $67,000. The market dynamics observed during this period indicate a clear change, with an increased volume of sell orders that were not covered by enough buy orders to sustain the price level. This imbalance has led to a break into what was previously considered a solid support zone around $68,000.
Related reading
The analysts delved deeper into the situation: “Volatility has returned, with btc falling as much as 3.5% to a low of $67k since yesterday. This sell-off was mainly due to strong spot selling pressure, which is quite negative. A major concern is the lack of settlements while settlement is taking place. btc is currently in a critical zone; the daily structure has been broken. “btc needs to bounce here, or it is very likely that we fall back to the lower $60,000.”
#3 Inflow Streak Ends in Spot bitcoin ETF Inflows
Investment dynamics in bitcoin spot ETFs have also reflected the market's bearish turn. After 19 consecutive days of positive inflows, these funds experienced significant x.com/WhalePanda/status/1800380285596397795″ target=”_blank” rel=”nofollow”>Departures for a total of 64.9 million dollars yesterday. Among them, the Grayscale bitcoin Trust stands out, which recorded outflows of $39.5 million. In contrast, BlackRock recorded smaller inflows of $6.3 million.
The performance of other ETF providers showed considerable variation. Fidelity recorded outflows worth $3 million, while Bitwise recorded inflows worth $7.6 million. In contrast, Invesco saw outflows of $20.5 million and Valkyrie also reported outflows totaling $15.8 million.
At the time of this publication, btc was trading at $66,967.
Featured image created with DALL·E, chart from TradingView.com
