Bitcoin’s price took a sharp decline, falling to $57,300, as investors remained uncertain about the outcome of the upcoming Federal Reserve announcement. This drop in price was largely influenced by permanent holders and whales reducing their demand, which created market anticipation of a decline. As a result, Bitcoin and other cryptocurrencies experienced a significant downturn, reaching their lowest levels in over two months. The decline of nearly 4.5% brought Bitcoin’s price below $57,000 for the first time since late February.
Investors are anxiously awaiting the Federal Reserve’s decision on interest rates, as they are eager to hear the central bank’s comments regarding future rate increases and monetary policy direction. This information is highly anticipated by market participants, as it provides insights into potential changes in economic policy that could impact various asset classes, including cryptocurrencies. Jerome Powell’s upcoming speech will be closely analyzed for any indications of interest rate cuts that may affect the market.
A recent report from CryptoQuant suggests that the decline in Bitcoin’s price is primarily driven by a significant reduction in demand from both permanent holders and whales. Permanent holders have slashed their monthly growth by 50%, from over 200,000 BTC in late March to just 96,000 BTC. Similarly, whales have halved their demand growth rate from 12% in March to 6%, signaling a shift in market dynamics.
Matteo Greco, a Research Analyst at Fineqia International, explains that increased selling pressure from long-term holders often serves as an indicator of broader market anticipation of a downturn. This sentiment is reinforced by the decrease in demand, as evidenced by the sharp reduction in Bitcoin purchases from spot exchange-traded funds (ETFs) in the United States. Daily purchases from these ETFs, which reached a peak of over $1 billion in mid-March, have significantly declined.
Adding to the downward pressure on Bitcoin’s price is an increase in selling activity by miners. Daily sales by miners in April have reached the highest levels since early January, indicating their need to cover operational costs or secure profits. This selling activity by miners further exacerbates the downward price movements in the cryptocurrency market.
Despite the optimistic expectations surrounding the Bitcoin halving in April, which typically leads to a price increase due to the reduction in new coin creation, the market has continued to experience a decline. Following the halving, Bitcoin’s value plummeted by an additional 15%, highlighting the influence of larger economic factors that are exerting pressure on the market.
Looking ahead, there is hope that Bitcoin prices could find support in the $55,000 to $57,000 range. This projection is based on the short-term holders’ realized price, which falls around $63,000. According to CryptoQuant, this range is 10% below the current realized price of short-term holders and has historically served as a strong support level during bull markets.
Bitcoin has shown resilience in its price movements historically, often experiencing reversals around key realized price levels. For example, in January 2024, Bitcoin’s price reached a bottom after declining to the short-term holders’ realized price levels of around $38,500.
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