Risk aversion heats up, market awaits guidance from the Fed on rate cuts
Original title: "Market continues to consolidate, waiting for guidance on the Fed's rate cut"
Original author: Mary Liu, BitpushNews
The crypto market opened lower this week as investors awaited the Fed and its upcoming interest rate decision and the Consumer Price Index (CPI) for May.
Bitpush data showed that Bitcoin once broke through the $70,000 mark in the early trading, hitting a high of $70,195, and turned down in the afternoon and returned to the support level near $69,600.
Altcoins fell more than they rose. Among the top 200 tokens by market value, Polymesh (POLYX) led the gains, up 9.7%; followed by Gnosis (GNO), up 8.6%; Livepeer (LPT) rose 5.5%. Wormhole (W) fell the most, up 18%, Biconomy (BICO) fell 17.1%, and Echelon Prime (PRIME) fell 10%.
The overall market value of cryptocurrencies is currently $2.53 trillion, with Bitcoin accounting for 54.1%.
As of Monday's close, the S&P, Dow and Nasdaq all rose, up 0.26%, 0.18% and 0.35%, respectively.
The Chicago Mercantile Exchange's FedWatch tool shows that traders expect the probability of the Federal Reserve cutting interest rates in September to 49% from 60% a week ago.
ETF inflows continue
The inflow data for spot Bitcoin exchange-traded funds (ETFs) is relatively optimistic, with $131 million flowing into ETF products on Friday, the 19th consecutive day of inflows.
CoinShares' report shows that a total of $1.83 billion flowed into US-listed spot BTC ETFs last week, while net inflows into digital asset investment products listed globally reached $2 billion, bringing the total inflow to $4.3 billion in the last five weeks.
CoinShares head of research James Butterfill analyzed: "We believe that this shift in sentiment is a direct response to weaker-than-expected US macro data, which brought expectations of monetary policy rate cuts. Positive price action has pushed total assets under management (AuM) above the $100 billion mark for the first time since March."
Crypto analyst Timothy Peterson said on the X platform that if the current pace continues, the speed of inflows into the spot BTC ETF will put BTC on track to hit a record high on July 31. In addition, if liquidity continues at the current rate, the price of BTC will reach $135,000 by the end of the year.
Short-term leverage rush
Bitfinex analysts hold the opposite view and say: "The large inflows into ETFs over the past 20 trading days have helped offset the pressure on BTC, but the fact that this has not been able to further drive prices higher or push BTC above the range high is unfavorable in the short term. The opposite view is that traders are executing base carry trades, holding long spot positions and short perpetual futures for hedging."
As shown in the above chart, the open interest (OI) of BTC and altcoins has been high. According to Coinglass data, BTC OI across major exchanges hit an all-time high of $36.8 billion on June 6. Despite the price correction on Friday, OI currently remains above $36 billion. ”
Analysts said: “We believe that Friday’s drop was more like a ‘leverage flush’, in which leveraged longs in a large number of altcoins (and to some extent major currencies) were wiped out and funding rates were neutralized. However, although the leverage purge/liquidation of altcoins was quite severe, we do not expect an immediate sharp drop.”
On June 7, the long liquidation amount in the crypto market exceeded US$360 million, and the total liquidation amount exceeded US$410 million, the highest level since April 14, exceeding the level when BTC fell below US$57,000, but this time only US$50 million of long liquidations came from BTC.
Analysts explained: "Most of them are altcoins, which explains the sharp drop in altcoins relative to mainstream currencies last week. Such liquidation events usually do not trigger further serious declines, so this week will be a critical week because the upcoming Consumer Price Index inflation report on June 12 is expected to be a major market catalyst, and prices are expected to continue to fluctuate in a tense environment as derivatives positions increase again."
Bitfinex believes that in the current environment, it is crucial for BTC to maintain a local low of around $68,000-68,500 for bulls, and failure to break through the range high will further put pressure on bulls.
Regarding the Fed’s monetary policy, Bitfinex analysts said that maintaining high interest rates for a long time is a double-edged sword that needs to be handled skillfully:
On the one hand, the strength and adaptability of the U.S. economy allow it to thrive even in a high-interest rate environment, thanks to strong labor demand and rising wages. This situation will support continued economic growth, solid consumer spending, and overall economic resilience.
On the other hand, there are also great risks in maintaining high interest rates for too long, which may suppress economic activity, lead to reduced investment, slower job growth, and possibly an economic downturn.
Analysts also said that recent rate cuts by the European Central Bank and the Bank of Canada were intended to "shift to easier monetary policy to boost growth, suggesting that the Fed may need to reassess its own monetary policy and that the actions of its global peers could influence its decisions in the coming months, especially if inflation trends and economic conditions warrant a shift."
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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