Article Title: “Market Continues Consolidation, Waiting for Fed Rate Cut Guidance”
Author: Mary Liu, Bitpush News
Investors are waiting for the Federal Reserve and its upcoming interest rate decision and May Consumer Price Index (CPI), as the crypto market opened lower this week.
Bitpush data shows that Bitcoin surged above the $70,000 mark early in the day, reaching a high of $70,195, but later dropped in the afternoon and returned to support near $69,600.
Altcoins saw mixed movements, with Polymesh (POLYX) leading the top 200 tokens by market cap with a 9.7% increase, followed by Gnosis (GNO) with an 8.6% rise, and Livepeer (LPT) with a 5.5% increase. Wormhole (W) led the losses with an 18% drop, followed by Biconomy (BICO) with a 17.1% decrease, and Echelon Prime (PRIME) with a 10% decline.
The total market capitalization of cryptocurrencies is currently at $2.53 trillion, with Bitcoin’s dominance at 54.1%.
As of Monday’s close, the S&P index, Dow Jones index, and Nasdaq index all saw gains, rising by 0.26%, 0.18%, and 0.35%, respectively.
The FedWatch tool at the Chicago Mercantile Exchange shows that traders now expect a 49% chance of a Fed rate cut in September, down from 60% a week ago.
Continued ETF inflows
Data on inflows into Exchange-Traded Funds (ETFs) for Bitcoin have been positive, with $131 million flowing into ETF products on Friday, marking the 19th consecutive day of inflows.
A report by CoinShares shows that last week saw a total of $1.83 billion flowing into US-listed spot BTC ETFs, with global listed digital asset investment products seeing a net inflow of $2 billion, bringing the total inflow in the last five weeks to $4.3 billion.
James Butterfill, Research Director at CoinShares, analyzed, “We believe this shift in sentiment is a direct response to weaker-than-expected US macro data, which has brought expectations of a rate cut. 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 on the X platform stated that at the current rate, inflows into spot BTC ETFs could potentially see BTC hitting a new all-time high on July 31. Furthermore, if liquidity continues at the current pace, the price of BTC could reach $135,000 by the end of the year.
Short-term leverage spikes
Analysts at Bitfinex hold the opposite view, stating, “Over the past 20 trading days, the significant inflow of ETFs has helped offset pressure on BTC, but in reality, this has not further pushed prices up or above the high end of the range, which is unfavorable in the short term. The opposite view is that traders are executing basic arbitrage trades, holding long spot positions and short perpetual futures for hedging.”
As shown in the graph above, the open interest (OI) for BTC and altcoins has remained high. Data from Coinglass shows that on June 6, the BTC OI on major exchanges hit a record high of $36.8 billion. Despite a price correction on Friday, the OI is still above $36 billion.
Analysts explained, “We believe Friday’s dip was more of a ‘leverage flush,’ where a large number of leveraged long positions in altcoins (and to some extent major currencies) were liquidated, and funding rates were neutralized. However, while the leverage clearout/liquidation in altcoins was quite severe, we do not expect a significant drop immediately.”
On June 7, the amount of liquidations in the crypto market exceeded $360 million, with a total liquidation amount surpassing $410 million, the highest level since April 14, exceeding the level when BTC dropped below $57,000, but this time only $50 million in long liquidations came from BTC.
Analysts explained, “Most of these were in altcoins, which explains the significant drop in altcoins compared to major currencies last week. This type of liquidation event typically does not trigger further severe declines, so this week will be crucial, as the Consumer Price Index inflation report due on June 12 is expected to be a major market catalyst, with derivatives positions increasing again, prices are expected to continue to fluctuate in a tense environment.”
Bitfinex believes that in the current environment, maintaining local lows around $68,000-$68,500 for BTC is crucial for bulls, and failure to break above the high end of the range will further pressure the bulls.
Regarding the Federal Reserve’s monetary policy, Bitfinex analysts stated that long-term high-interest rates are a double-edged sword and require clever handling:
On one hand, the strength and adaptability of the US 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, steady consumer spending, and overall economic resilience.
On the other hand, maintaining high-interest rates for too long carries significant risks, which may suppress economic activity, lead to reduced investment, slow employment growth, and potentially result in an economic downturn.
Analysts also noted that recent rate cuts by the European Central Bank and the Bank of Canada were aimed at “shifting towards more accommodative monetary policies to promote economic growth, indicating that the Federal Reserve may need to reassess its own monetary policy, with actions by its global peers potentially influencing its decisions in the coming months, especially if inflation trends and economic conditions necessitate a change.”
