Crypto markets ended the week on a subdued note as Bitcoin continued to consolidate between $60,000 and $65,000.
The University of Michigan's May consumer report was worse than expected, with broader consumer indicators hitting their lowest level in six months. The report revealed that inflation expectations for the next year rose from 3.2% to 3.5%, still at a high level compared to pre-pandemic levels. The Federal Reserve seems to be in a "dilemma" to choose between adapting to a slowing economy and fighting rising inflation expectations. Risk assets erased gains after the report was released.
According to Bitpush data, Bitcoin experienced a sharp sell-off near midday on Friday, falling from $63,000 to a low of $60,155, and has since been consolidating below $61,000.
As of writing, BTC is trading at $60,500, down 3.45% on a 24-hour basis.
The top 200 altcoins by market cap fell more than rose, with only 20 altcoins rising. Akash Network (AKT) performed the best, up 14.6% and trading at $5.93, followed by Jito (JTO) up 6.4% and ZetaChain (ZETA) up 5.3%. ssv.network (SSV) fell the most, down 17.5%, cat in a dogs world (MEW) fell 11.6%, and AIOZ Network (AIOZ) fell 8.2%.
The overall cryptocurrency market cap is currently $2.25 trillion, with Bitcoin’s dominance rate at 53.2%.
Stocks were mixed, with the Dow rising for an eighth straight session, closing up 0.32%, while the S&P gained 0.16% and the Nasdaq was flat.
Bitcoin is in the ‘bored to death’ phase
Charles Edwards, founder of cryptocurrency hedge fund Capriole Investment, said in the X platform: "Bitcoin is in the 'bored to death' stage."
He explained that this consolidation period could last between one and six months, during which Bitcoin will move in a range with low volatility until market participants lose patience, adding that market sentiment will be most negative until the consolidation ends.
“When you get tired enough of sideways trading, common symptoms will include thinking the halving is priced in, the bull run is over, and selling and buying stocks at the bottom, and this sentiment and shorts will peak before a big move higher,” Edwards said.
Chris Yin, CEO and co-founder of Plume Network, said: “It has been between about 60,000 and 64,000 for the past few weeks, and the overall trend seems to be downward consolidation. So in the short term, we will see, but it is very likely that Bitcoin will continue to decline for a while. This is natural. After the Bitcoin halving and several months of price increases, it is natural to have some cooling down, especially when the Fed has not yet cut interest rates significantly.”
Yin said that over-anticipation of rate cuts means that “the market is a little ahead of reality, so naturally there will be some pullbacks. In addition, global macro instability is also a problem, “amidst increasing global conflicts,” which leads to more panic and wait-and-see attitudes. Not to mention that all well noted that SEC Chairman Gensler continues to take enforcement actions in the cryptocurrency space.”
Chris Yin said that what people really need to pay attention to is the macro environment.
First, investors are waiting for economic data to improve and signal a rate cut. U.S. inflation has been high, so when inflation cools down, Jerome Powell will cut rates sharply. Once this happens, the relevant indicators will reverse – BTC ETF inflow data improves, and traders will feel comfortable injecting liquidity again, driving up BTC prices.
Meanwhile, the upcoming U.S. election in November will be an important indicator, as Trump has consistently stated that he is positive about cryptocurrencies, while the Biden administration is clearly very negative about the asset class, Yin said: “If Trump wins, risk asset prices are positive, and if Biden wins, things will tend to be conservative.”
'The bottom may be near'
The bottom may be near, says analyst firm Santiment
“Traders are showing interest in ‘buying the dip’ on Bitcoin’s latest pullback,” Santiment said on X platform Friday. “Generally speaking, a lack of confidence from the crowd is a strong signal that prices are near a bottom.”
Bitfinex analysts noted in a note on Friday that bitcoin’s recent weakness comes against the backdrop of a surging dollar and fading expectations of rate cuts, and said the calm could last until early summer.
“We expect market uncertainty to remain in the near term amid a low volatility environment until the actual tapering of QT (quantitative tightening) in June,” the analysts said.
The Fed announced plans to curb the pace of balance sheet reduction starting next month, which will affect the liquidity of the US dollar, thus favoring risk assets such as cryptocurrencies that are sensitive to the global liquidity environment. Bitfinex reported: "The continued strength of Bitcoin and the recovery of range lows after the FOMC and job market data, and the simultaneous weakness of the US dollar, is a new sign that will prepare us for a very bullish view on Bitcoin in the third quarter to the fourth quarter.
