Just as analysts thought Bitcoin (BTC) was showing signs of a price breakout, the crypto market has turned downward amid increased regulatory uncertainty. Now it looks like BTC is stuck below the $28,000 resistance.
Bitcoin price hit a 30-day low on May 24 at $26,113 as traders worried that the price could fall further, noting that the 5% drop in 24 hours was a key moment for the rally. real for the cryptocurrency market.
Similar worries exist for Ether (ETH) trading above $2,100 after the Shapella upgrade only followed by a 7-day low of $1,783 on May 24. The downturn occurred when Ether remains locked below the $1,900 resistance level with data suggesting a near-term uptrend is unlikely.
CONFIRMATION ABOUT RISK ASSETS
While some analysts believe that Bitcoin could see an inflow of money in the event of a U.S. default, there is a significant risk that the U.S. Treasury will run out of funds, straining liquidity.
To date, crypto prices have remained highly correlated with the Dow and S&P 500, and most major banks still predict the US will experience a severe recession at some point in the year. 2023.
According to US Bank analysis incorporating more than 1,000 data points, investor sentiment about the current state of the economy remains low.
According to US Bank analysis,
Our US health check is in line with a historic recession as the Federal Reserve continues to tighten monetary policy to combat rising inflation.
The Fed’s Possibility of Continuing to Raise Interest Rates
Despite the capital repurchase and debt management challenges that high interest rates are causing for banks, Federal Reserve Chairman Jerome Powell appears committed to reducing inflation through further rate hikes.
After Mr. Powell’s speech at the Federal Open Market Committee (FOMC) on May 4, the market seemed firmly convinced that the Fed would pause to raise interest rates. The CME’s FedWatch tool suggests a rate hike is still possible. 34% believe a new attractive interest rate hike is imminent, up from 28% on May 17. Some Bitcoin analysts believe two more rate hikes will occur, creating massive volatility .
TVL AND VOLUME STILL LOW
The Total Value Locked Index (TVL) is a popular way to check the health and sentiment of the cryptocurrency market. According to DeFiLlama, TVL across all protocols has dropped 1.65% in the last 24 hours and lost $23 billion since June 12, 2022.
Trading volume is also still low. After trading volume hit a year-to-date high on March 11 of $24.9 billion, trading volume on May 23 was just $2.3 billion.
Given the major macro difficulties and low trading volume, it is likely that the volatility of the cryptocurrency will remain.