The state of affairs in the Bitcoin market has been monotonous for quite some time now. With the profit-booking trend in play, BTC is currently witnessing its largest long-term HODLer capitulation.
As illustrated below, the divergence between the purchase price [blue] and the selling price [pink] of such market participants has drastically widened, indicating that the newest entrants to the LTH group are capitulating, and are fearful of further downside.
Bearish signs start flashing for Bitcoin
Despite that, Bitcoin kickstarted May by opening above its $37k support on the monthly chart. Nonetheless, at press time, the sentiment was seen gradually flipping back to bearish.
Consider this – The funding rate across exchanges was positive—favoring long traders—a couple of trading sessions back. However, at press time the FR curves on almost all platforms were seen pointing downwards, bringing to light the eroding optimism.
During the four-hour frame, the signs of weakness were even starker. Bitcoin had lost three crucial moving averages [the 50 (yellow), 100 (green), and 200 (red) day] as supports. At press time, it was trading below all of them and was at the mercy of $38.5k and $37.3k.
The RSI too had started treading below the neutral zone, highlighting the deficient bullish pressure.
The FOMC factor
Even though the two aforesaid levels [ $38.5k and $37.3k] are guarding Bitcoin at the moment, it is doubtful if they’ll be able to keep the boat afloat. Here’s why:
The US Federal Reserve’s open market committee meeting is set to end on Wednesday, 4 May. The same is set to be followed by a series of announcements.
A 50 basis point interest rate hike is widely expected, given the recent commentary from officials. Alongside, other rate inclines are expected to follow, to reduce inflatio
Historically, the Bitcoin market has been very receptive to macro-announcements. In and around such periods, a lot of positioning and repositioning takes place, for market participants remain quite indecisive. In effect, the price doesn’t follow a stabilized trend.
So, if the rates are indeed hiked, experts expect asset prices to take a hit. In such a scenario, having long positions open could prove to be quite detrimental. However, if the FOMC announcement is positive, and well-received by market participants, then a 180 flip can be expected from Bitcoin.
Thus, keeping the technicals and the FOMC factor in mind, it’d be best for low-risk appetite traders to exercise caution and observe the trend from the sidelines before entering into any position.