Daily News | Bitcoin Faces Decline Following Fed Worries, Crypto Markets Prepare for Tightening Liquidity

Crypto Daily Digest: Bitcoin Faces Price Drop Following Fed Concerns, while Crypto Markets Brace for Downturn

Bitcoin (BTC) experienced a decline in price as concerns over jobs data and inflation were expressed by Loretta Mester, President of the Federal Reserve Bank of Cleveland. Mester’s remarks, emphasizing the need for further action to combat inflation, resulted in a drop of 2%, bringing Bitcoin’s value to $27,000.

Despite this setback, some market participants remain optimistic about the long-term prospects of the cryptocurrency. Experts such as Mikkel Morch from ARK36 and Michael Silberberg from Alt Tab Capital believe that Bitcoin’s fundamental drivers, including adoption and institutional interest, will contribute to future price increases.

Traders are now closely watching the release of nonfarm payrolls data, with a projected addition of 180,000 jobs in May. If the figure surpasses expectations, it could impact Bitcoin prices in either a bullish or bearish manner.

Simultaneously, the broader crypto market is bracing for a downturn as liquidity tightening resumes following the lifting of the U.S. debt ceiling. The replenishment of the U.S. Treasury general account, coupled with the Federal Reserve’s winding down of its balance sheet, will withdraw a significant amount of money from the financial system. This reduction in liquidity is expected to exert downward pressure on cryptocurrency prices in the coming months.

Earlier this year, the market witnessed a surge in prices of risk assets, including cryptocurrencies, fueled by increased liquidity. However, as the government issues debt to refill the Treasury account and the Fed continues its quantitative tightening campaign, liquidity conditions are set to deteriorate. This negative impact on liquidity, combined with the diminishing likelihood of the Fed reducing interest rates and the current low volatility and trading volumes in the market, creates an environment ripe for a potential shock in the crypto markets.

The combination of ongoing factors, including the debt ceiling resolution, reduced liquidity, and depressed volatility, has raised concerns about the short-term outlook for crypto markets. Amidst this uncertain landscape, market analysts and institutional trading platforms are cautioning traders and investors to be prepared for increased volatility. Excessive leverage should be avoided, and close monitoring of liquidity conditions is advised.

Bitcoin (BTC) $29063 (+0.14%) - Neutral Outlook

Continuing from Monday’s analysis, BTC is currently trading with the golden zone, indicating if its price breaks below the 61.8% (26781) level, then the 4-hr accumulation structure would be invalidated, meaning we would have to reevaluate. However, if BTC sees a continuation of the rebound and closes above the 38.2% (27343) level, then we can safely assume the accumulation structure is intact and any subsequent fluctuation should remain above the 50% (27062) level, before BTC sees another surge above the Jump-Across-Creek (JAC) area between 28065 & 28445.

Overview:

• Closest hourly support zone: 27062 - 26990
• Closest hourly resistance zone: 27150 - 27262
• Key Level: 26893 (4H Creek Level)

Hourly Resistance zones

1. 27150 - 27262
2. 27343 - 27538
3. 27660 - 27790

Hourly Support zones

1. 27062 - 26990
2. 26893 - 26781
3. 26690 - 26570

Macro: Investor Sentiment Dampened as Asian Stock Futures Fall on Interest Rate and Earnings Issues

Asian stock futures declined as investors turned their attention to interest rates and earnings concerns, shifting focus away from the debt ceiling issue. Benchmark futures in Japan, Hong Kong, and Australia slid, adding pressure to regional equities amid worries about Chinese economic growth.

US equity futures remained flat after the previous session’s declines. The S&P 500 closed 0.6% lower, struggling to maintain its monthly gain, while the Nasdaq 100 fell 0.7% due to Nvidia Corp. shares’ decline. Concerns about narrow market breadth persisted, with only a few tech stocks driving the rally. The S&P 500 closed below 4,200, reducing its May advance to 0.3%.

Federal Reserve officials hinted at a possible pause in interest rate hikes, with Governor Philip Jefferson suggesting rates may remain steady in June. However, the JOLTS jobs report showed high job openings, tempering Optimism. The ongoing US debt-ceiling negotiations progressed, but caution remained as investors sought improving data and a shift in confidence for an upward market move.

Corporate earnings reports influenced sentiment, with Salesforce shares tumbling 7% on a dim sales outlook, and Hewlett Packard Enterprise falling 7.1% due to slimmer revenue projections. Commodities priced in the US dollar, including West Texas Intermediate crude, declined as the dollar rallied.

Investors remained cautious as interest rates, earnings, and the debt-ceiling negotiations shaped market sentiment. Broad sector participation and improving economic data were seen as necessary for a sustainable rally, making equities viewed as “extremely vulnerable” in the last month of the quarter.