In the face of rising inflation and a weak GDP, the expectation that the Federal Reserve (FED) will maintain interest rates has led to a decline in Bitcoin prices. The cryptocurrency market experienced widespread pressure over the weekend, with Bitcoin’s price dropping below $62,500, resulting in a 2.2% correction. Altcoins, on the other hand, faced even greater selling pressure, with corrections ranging from 4% to 10% among the top ten altcoins.
Looking ahead, there are significant economic developments expected to take place this week. The FED’s interest rate decision on May 1 is anticipated to have a 95.6% chance of keeping rates unchanged. Additionally, the US unemployment rate for April will be announced on May 3. However, the expectation for a rate cut in the US this year has significantly decreased.
This week, attention was drawn to concerning data from the US. Weaker than expected GDP data suggests a slowing economy, while high Core PCE figures indicate persistent inflation issues for the Federal Reserve. Although there are concerns of a possible stagflation scenario with negative GDP growth and high inflation, this remains speculative for now.
The market sentiment has shifted to the point where only one rate cut for 2024 is being priced in, a departure from the initial prediction of seven cuts at the beginning of the year and three in March. However, the uncertainty surrounding the FED’s interest rate policy has created selling pressure in the cryptocurrency market, particularly impacting Bitcoin prices.
There have been notable changes in the dynamics of the crypto market recently. Volatility has decreased in leading cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), signaling a significant squeeze in the market. The long-awaited drop in Bitcoin’s volatility from 70% to 50% has prompted investors to reflect deeply.
Nevertheless, it remains uncertain whether these declines are just a temporary pause or indicative of a permanent change in market sentiment. The increased downside skewness in Ethereum’s risk returns to 13% has heightened market uncertainty.
All eyes are now on the launch of spot Bitcoin and Ethereum ETFs in Hong Kong this week. This move could attract institutional capital from Asia to the crypto space and create new momentum in the market. If these ETFs prove successful, it is expected to increase confidence in cryptocurrencies and lead to more institutional investors entering the market.
Disclaimer: The information provided in this article should not be considered as investment advice. Investors should be aware that cryptocurrencies are highly volatile and carry risks, and should conduct their own research.
