Following a significant $250 billion liquidation in the previous few days, investors lost an additional $210 billion as the bulls in the cryptocurrency market started to lose control, and the market cap fell from $2.34 trillion to $2.13 trillion. On Wednesday, the price of Bitcoin drops to $51,120, a 10% decrease in a day and a 17% decrease in a week. Traders predict that the bitcoin price will continue to decline, possibly reaching $47K.
The price of ether falls by over 6% to $2,918. A few other altcoins had a 5-12% decline on the last day, including Cardano (ADA), XRP, Toncoin (TON), and Solana (SOL). With a more than 13% decrease, meme currencies Dogecoin (DOGE) and Shiba Inu (SHIB) suffered more.
As the Crypto Fear & Greed Index dropped from 67 (greed) to 54 (neutral) in just one day, the mood of the cryptocurrency market has worsened.
Why Are Cryptocurrency and Bitcoin Prices Dropping Today?
Ahead of the Federal Reserve’s monetary policy announcement on May 1, expectations of higher-for-longer U.S. interest rates have caused panic selling, sending bitcoin and cryptocurrency values plunging. Investors interpreted hawkish signals from the Fed, which is expected to hold interest rates steady at 5.25%–5.50%. However, Chair Jerome Powell may reduce the three rate reductions previously announced to one or two this year.
Recent PCE statistics showed ongoing inflationary pressures, and the 1.6% GDP growth in Q1 demonstrated stagflation. The prediction market projects only this year’s Fed rate decrease, which primarily drives the correction in the cryptocurrency market.
As everything goes on, the U.S. dollar index (DXY) rises and is headed for six-month highs at 106.45. The yield on the U.S. 10-year Treasury (US10Y) increased to 4.688%. The increase in figures suggests that inflation is impacting the price of bitcoin. Traders anticipate the Q2 2024 Treasury refunding news, as it may lead to a partial rebound in Bitcoin.
Not Helped by Bitcoin ETFs
Following a significant downturn on Wall Street on Tuesday, the U.S. spot Bitcoin ETF fails to support, with outflows of $161 million from the fund. As a result, there have been outflows from the market for five days. Only $12 million was traded on day one for the six-spot Bitcoin and Ethereum ETFs in Hong Kong, which is 383 times less than the first day of trading for the Bitcoin ETFs in the United States.
Institutional investors, who appear to have given up on the product, are unlikely to invest in Bitcoin ETFs until there are encouraging developments.
According to Coinglass data, the selloff resulted in the cryptocurrency market liquidating almost $475 million. Of these, about $55 million worth of short positions and $420 million worth of long bets were liquidated.
The highest single liquidation order occurred on the cryptocurrency exchange OKX when a trader converted ETH to USD worth $6.07 million, resulting in the liquidation of almost 145K traders.
Experts Forecast a Drop to Higher $40K Levels.
According to cryptocurrency specialist Michael van de Poppe, the price of Bitcoin is nearing the bottom of the correction and may drop as low as $56–58K. He continued, “It’s already down 20% from the highs, and we’ll have some more downside from here.”
Expert trader Peter Brand is less optimistic about the price of bitcoin. According to him, the bitcoin price has peaked, and the charts show a descending triangle, which denotes a decline in price until it is broken. He projects a decline to between $47 and $49K before the bull market’s resumption until 2025.
