Bitcoin Crash – Is the Bull Run Over?

Bitcoin dropped to $56,675 in the lead-up to Wednesday’s Fed decision with the Bitcoin bull run in danger of stalling, as market sentiment turns bearish. On Tuesday Bitcoin had dropped around 6% dipping below the $60,000 support level before dropping further again on Wednesday.

Source: BNC

Bitcoin is now down 20% from its all-time high of $73,100 in March. April’s sharp decline of 18%  breaks a seven-month run of green gains. April’s pullback is the worst monthly performance since the implosion of crypto exchange FTX in November 2022.

For those who have been discombobulated by this week’s price drop, it is with noting that Bitcoin remains up around 20% from the launch of the ETFs in January, and over 34% YTD.

On Wednesday, the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve kept its benchmark fed funds rate steady at 5.25-5.50%. In line with expectations, the FOMC noted a halt in progress towards lower inflation this year and indicated a reluctance to adjust rates until there is greater assurance that inflation is steadily approaching the 2% mark.

Additionally, the FOMC disclosed its decision to decelerate the reduction of Treasuries held on its balance sheet, known as quantitative tightening (QT), from $60 billion per month to $25 billion per month. Economist Joseph Brusuelas suggested that, all else being equal, this move is likely to stimulate risk appetite and bolster asset prices.

At the start of 2024, markets had anticipated a series of rate cuts from the U.S. central bank. However, these expectations have significantly diminished in recent weeks due to the sustained strength of the economy and a slight uptick in inflation during the first four months of the year. Prior to the FOMC’s decision today, the CME FedWatch tool indicated a nearly 25% probability of zero rate cuts for the year, compared to just a 1% chance one month ago.

This shift in expectations has had a dampening effect on traditional markets, with the Nasdaq declining approximately 5% since reaching its 2024 peak three weeks ago, and the S&P 500 experiencing a similar decrease since its year-to-date high in late March. Moreover, the decline in Bitcoin prices, now more than 20% below its mid-March record high of over $73,000, can likely be attributed in part to this change in sentiment.

There could be further price declines to come with 10x Research eyeing a price target of $52,000-$55,000 as it predicts further selling pressure. The digital asset research firm 10x said it sees selling pressure toward the $52,000 level based on outflows from the U.S. spot exchange-traded funds, which have totaled $540 million since the Bitcoin halving on April 20. It estimates that the average entry price of U.S. Bitcoin ETF holders is $57,300, which could be a key support level. The closer the spot price of Bitcoin is to this average entry price, the greater the likelihood of further ETF unwinding, 10x CEO Markus Thielen wrote on X.

“There might have been a lot of ‘TradeFi’ tourists in crypto – pushing longs until the halving – this time is now over,” he said. “We expect more unwinding as the average Bitcoin ETF buyer will be underwater when Bitcoin trades below $57,300. This will likely lower prices to our target levels and cause a -25% to -29% correction from the $73,000 top – hence our price target of $52,000/$55,000.”

Crypto trader and technical analyst Rekt Capital wrote on X, “This current Bitcoin retrace is slowly turning into an almost 50-day retrace. Typical retraces have been 2-3 weeks, longer ones up to 2 months,” he said, noting that such drops are par for the course, even in Bitcoin bull markets. He provided a list of six Bitcoin pullbacks of 18% to 23% dating to the Bear Market Bottom of 2022, noting that the current pullback of 23.6% (April/May 2024) is officially the deepest in the cycle.

Source: X

Meanwhile, popular technical analyst Dave the Wave noted that $58,000 represents the 0.38 fib retracement of the recent move up. He noted that this is a key support level, and if it doesn’t hold, a larger correction down to $48,000 is possible.

Source: X