Bitcoin (BTC) is starting a new week with plenty to make up after its worst April performance ever.
The monthly close of BTC/USD has put it firmly within its set trading range in 2022, and fears that $30,000 or even less is next.
However, sentiment improved with the start of May, and while crypto broadly remains tied to macro factors, the cross-chain data is satisfying rather than panicking analysts.
With a decision on US economic policy on May 4, the coming days may be a matter of unexpected reactions as markets try to align themselves with central bank policy.
Cointelegraph takes a look at these and other factors that are set to shape bitcoin price activity this week.
Recharging again in the spotlight
Macro markets – as now – are on alert this week as another US Federal Reserve meeting looms on the horizon.
With inflation rampant around the world, President Jerome Powell is expected to make good on his previous pledges and announce major interest rate increases.
Wednesday will be pivotal.
The Fed is expected to confirm a $95 billion per month selling program that has not yet been launched in the market. https://t.co/gRRwd059Lw
– Charles Edwards (@caprioleio) May 2, 2022
How severe and how quickly it is applied is a matter of separate debate and discussion Fears Whether the markets have already “selected” various options.
Any shocks are likely to cause at least temporary swings in the markets, and over the past six months or so, crypto has been no exception.
Thus, the FOMC meeting, which will be held on May 3 and May 4, is of interest.
“First came the Fed. Then Netflixpocalypse. Then the Russian invasion. Then sanctions. Then the Fed and the biggest Treasury dump ever. This week it was earnings. Next week the Fed again,” macro analyst Alex Krueger summary during the Weekend:
“Fed’s QT announcement on Wednesday will determine the fate of the market.”
Krueger was referring to a policy known as quantitative tightening (QT) — the counterpart to quantitative easing, or quantitative easing, that describes the pace of the Federal Reserve withdrawing economic support in an effort to reduce its $9 trillion balance sheet.
The risk assets, already sensitive to the conservative environment, are already tipped by Bitcoiners to suffer a significant loss in the coming months, with the cryptocurrency depreciating with them.
“It’s easy to overlook this, given the broad market slump last week, but: Along with meme stocks, stocks invested in Bitcoin sensitivity have already hit new lows,” said Joren Timmer, global macro manager at Fidelity Investments. Giant Asset Management added.
The accompanying chart of Goldman Sachs’ Bitcoin Sensitive Stock Index – 19 major stocks with exposure to cryptocurrency – illustrates the relative pain he’s already experiencing.
Next week will see the focus shifted back towards inflation itself with the release of the US Consumer Price Index (CPI) data for April.
Time for $28,000 Bitcoin?
At around $37,600, the monthly April close was decidedly uninspiring for Bitcoin users, data from Cointelegraph Markets Pro and TradingView show.
Although some ground was subsequently regained, BTC/USD at least reconfirmed a short-term desire to trade in a narrow range well below the top of the 2022 trading corridor of $46,000.
Expectations were previously high that April would do better, but in the end, 2022 ended up being the worst April ever for Bitcoin, with an overall loss of 17.3%, data from on-chain monitoring source Coinglass confirms.
Against this background, it is no wonder, then, that the mood among analysts is equally cautious.
“BTC chart is heavy at the moment, and a break below $35,000 could trigger a rush to the exit…but I don’t trust breakout patterns in this range. We have seen short pressure and ATH breakout traps over the past year,” famous trader Chris Dunn chirp On May 1st:
“It’s risky to expect, you’d better react… I’d like to lose $26,000.”
Dunn is not alone in calling for a capitulation event to move the market to $30,000 or less.
“In terms of talking about capitulation, I think it would require Bitcoin to drop below $30,000,” said analyst Matthew Hyland. argue In one of the many tweets about the Bitcoin volume profile:
“Low volume since May of last year that has brought BTC to $30K. Low volume = low turnover of buyers and sellers. Below 30K will unlock the buyers who bought before 65K in early 2021.”
Hyland explained that lower volume markets tend to see greater price swings, and a significant drop in BTC price may be necessary to reignite participation amid a general lack of participation at current levels.
To unlock a larger volume, Bitcoin would be required to flow below 30K
Based on volume levels between 20K and 30K (which BTC has spent less than 3 weeks in), I don’t expect it to match the volume profile we saw last May, but it will still stand out compared to current volume: pic.twitter.com/msQRmz9UVi
– Matthew Hyland (@MatthewHyland_) May 1, 2022
Over the weekend, meanwhile, calls for a short-term trip to $35,000 surfaced.
US dollar strength keeps pressure
April may have come and gone, but the GOAL of the US Dollar Index (DXY) remains firmly in the room.
One day of consolidation on April 29th is already historic, and on May 2nd, DXY was already trying to continue the breakout that saw dollar strength rise to its highest levels since 2002.
At 103.4 as of press time, DXY has not shown any signs of a more significant pullback, which has disappointed Bitcoin at the mercy of the reverse correlation.
At the moment, the inverse relationship between Bitcoin and DXY […] It states that if the index stabilizes above the DXY 102 resistance level, this could weaken Bitcoin, and the price action could pull back to $35,000 and below, especially if the DXY rally can be attributed to monetary policy tightening,” explained the latest Uncharted news release. String Analytics Inc.
In this case, 102 was a small problem for DXY, which could gain more if the Fed’s rate hike decision is at the upper end of the spectrum.
“The development of the dollar is highly dependent on the course of action of the Fed. Rising inflation and the prospect of a 50 basis point rate hike in early May may strengthen the DXY,” Glasnod added.
As Cointelegraph recently reported, other major global currencies have struggled along with the US dollar cryptocurrency in recent weeks, with a particular focus on the fate of the Japanese yen. Japan, unlike the United States, continues to print huge amounts of cash, which reduces the value of its currency even further.
Trader: illiquid supply outweighs low prices
Last week saw a new record for the percentage of Bitcoin supply having been idle for at least a year – 64%.
As seasoned scammers – or at least those who bought before the July 2021 low near $28,000 – there is thus a determination not to give up yet.
Now, more data has been added to the mix, and it comes in the form of a non-liquid supply.
According to Glassnode’s Ill Liquid Supply Change Index, recent weeks have produced significant increases in the public sector’s supply of bitcoin, which is now no longer available for purchase.
The result is that illiquid supply volatility has reached levels not seen since late 2020 when BTC/USD started showing signs of a “supply shock” as market participants built up in what was already a strongly “accumulated” asset class.
“This number is at an all-time high, which we also saw in 2020 (the increase). Ultimately, there are a large number of “illiquid” coins, which increases the potential for a potential supply shock,” Michael van de Poppe, one of the Cointelegraph contributors She said As part of the comments on the numbers.
Continuing, van de Poppe argued that the index “tells us a lot” and could even remove some of the fear of a drop to $30K.
“Yes, the market can still make a new lower low as the bear market continues (relatively; the altcoin bear market is currently active for a year, which means retail is over) and $30K can be reached. But, basically, the data tells a lot “.
Cryptographic morale “skips” the macro
In what could be a positive aspect under the current circumstances, cryptocurrency sentiment is already pointing higher this week, even as the jitters continue in the traditional market.
Related Topics: Top 5 Cryptocurrencies to Watch This Week: BTC, LUNA, NEAR, VET, GMT
The Crypto Fear & Greed Index, which hit a two-week low of 20/100 last week, has now come out of the “extreme fear” area.
At 28/100, the Crypto index is now higher than its counterpart in traditional finance (TradFi), the Fear & Greed Index, which hit 27/100 on May 2.
If the cryptocurrency continues to do its job as a driver of upcoming market moves, there may be some modest reason to rest in the data.
28/100 represents the best Crypto read since April 17th.
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