Erase the rebound after the Fed meeting, why did BTC break below $36,000?

BTC saw a brief rally on Wednesday after the Federal Reserve announced a rate hike. However, the cryptocurrency’s “bounce gains” following the current Fed meeting have been wiped out after Bitcoin’s sudden price drop below $36,000 on Thursday afternoon, which subsequently drove the entire crypto market lower.

Noise trading temporarily lacks upward momentum

Risk assets climbed after Fed Chairman Jerome Powell said there would be no increase of 75 basis points, with trading volumes and actual volatility surging around the announcement, but volumes quickly retreated within 24 hours.

The intraday “relief rally” in cryptocurrencies and stocks on Wednesday was “trader noise,” according to an analysis by Bloomberg Intelligence’s Mike McGlone, commodity strategist. (Noise traders are usually non-professionals who act illogically and trade with incomplete or inaccurate data.)

At the time, the Glassnode team also reminded that Bitcoin prices are still range-bound and continue to lack any clear macro momentum in either direction, that the correlation between Bitcoin and traditional markets is still close to an all-time high, and that Bitcoin’s role as a risk asset is more robust. Widespread awareness remains a significant headwind.

Intertwined with global economic factors to increase uncertainty

After the Fed rate hike meeting, on May 6, Robert Holzmann, member of the European Central Bank Governing Council, said that the central bank will discuss raising interest rates at its June meeting and may decide to raise interest rates once.

The GSR institutional crypto trader noted that Bitcoin’s correlation with stocks has had its ups and downs, especially during major macro events such as the Federal Open Market Committee meeting. Sentimentally, it’s more important to see how the cryptocurrency market is doing when the stock market closes.

In addition, the regulation of the crypto market has not been relaxed. Recently, the European regulator MONEYVAL listed cryptocurrencies as one of the anti-money laundering threats. Separately, Argentina’s Central Bank (BCRA) announced that it would ban banks in the country from offering cryptocurrency services to customers. The BCRA statement said that banks are prohibited from providing services to any digital asset that is not regulated by the central bank, which amounts to a de facto ban as digital assets are currently not regulated by the Argentine government.

Market analysts believe that several factors, including rising inflation, geopolitical crises, crypto regulation, and shifts in U.S. monetary policy, continue to drive additional short-term volatility in the cryptocurrency and stock markets. The crypto market has increasingly tracked the stock market in recent months, making it more intertwined with global economic factors.

On May 6, the three major U.S. stock indexes closed sharply lower, the Nasdaq fell 4.99%, the S&P 500 fell 3.55%, and the Dow fell 3.11%. Obviously, the price of Bitcoin was also affected.

Institutional investor mentality dominated by uncertainty

The current crypto market sentiment is not positive. Implied volatility, a measure of investors’ willingness to buy BTC options, has fallen to its lowest level since early 2019 (3.1%), according to data from Coinbase analytics platform Skew. This indicator measures how much options traders can expect to pay in the near term.

Recent uncertainty still dominates the mindset of institutional crypto investors, said Michael Saffai, a partner at crypto asset trading firm Dexterity Capital. The recent liquidation may exacerbate the pullback, but the asset still has a solid $30,000 floor, so I don’t think we’ll see a massive pullback like 2020 and 2021.

In addition, according to the latest Web3 report released by the blockchain analysis company Chainalysis, NFTs experienced explosive growth in 2021, but the market stabilized after entering 2022, maintaining a growth attitude in January, but fell into a downturn in February and then in Recovery began in mid-April. As of May 1, more than $37 billion has been injected into the NFT market. The number of active NFT collections on OpenSea has also continued to grow since March 2021, and currently exceeds 4,000. However, the growth of institutional investors has not continued. Institutional NFT purchases increased weekly between late November 2021 and mid-February 2022, but then dropped abruptly, and institutional NFT activity has not yet reached winter 2021 levels.

In addition, according to the latest data from Coinshares, the total amount of funds flowing out of the market due to withdrawals by institutional investors exceeded $339 million in a month. While the market saw similar swings at the start of the year, the study shows that this one has not reversed the trend. According to Coinshares, the amount at the beginning of the year was around $467 million, a difference of $128 million. According to the report, Bitcoin funds accounted for the majority of recorded withdrawals.

Posted by:CoinYuppie,Reprinted with attribution to:
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