Cryptocurrency Values Slide on May 1st: Potential Bitcoin Crash Looming Towards $45-49K?

In a turbulent twist to the crypto market, a significant downturn has been observed, which saw the cryptocurrency market capitalization plummet from $2.34 trillion down to $2.13 trillion. This downturn resulted in an approximate loss of $210 billion for investors. This comes in the wake of a devastating $250 billion liquidation that occurred in the preceding days. Central to this downturn is bitcoin, which experienced a dramatic plunge, with its price dropping to a low of $51,120 on Wednesday. This represents a decrement of 10% over the course of 24 hours and an alarming 17% over the week. Market spectators are now bracing for an even steeper decline, predicting Bitcoin’s price could plummet to lows around the $47,000 mark.

Other major cryptocurrencies were not spared by this market downturn. ethereum, for one, fell over 6% to a low of $2,918. Similarly, altcoins such as solana (sol), XRP, Toncoin (TON), and Cardano (ADA) all experienced declines ranging between 5-12% in the same 24-hour period. Furthermore, Meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB) fell victim to even more severe drops, surpassing 13%.

The consumer sentiment surrounding the crypto market has notably worsened, as indicated by the Crypto Fear & Greed Index which plummeted from 67 (greed) to 54 (neutral) in just a day.

The pressing question arises, “Why are Bitcoin and other crypto prices falling today?” Several factors seem to be at play here, including panic selling sparked by fear of the United States maintaining elevated interest rates for a longer duration. This sentiment has been exacerbated in anticipation of the Federal Reserve’s monetary policy announcement set for May 1. Market participants interpreted a possible hawkish stance from the Fed, which is anticipated to maintain interest rates between 5.25% and 5.50%. Fed Chair Jerome Powell’s indications towards lesser rate cuts, from the previously announced three, have contributed to market worries.

Moreover, recent economic indicators have not been promising. Data on Personal Consumption Expenditures (PCE) highlighted persisting inflationary pressures, while the first-quarter GDP growth data of 1.6% hinted at stagflationary scenarios. The prediction market has now adjusted its forecasts, expecting only one rate cut by the Fed this year, which is primarily fueling the current market corrections.

The US Dollar Index (DXY) has experienced a surge, reaching 106.45 and moving toward its six-month high. Concurrently, the US 10-year Treasury yield ascended further to 4.688%. These indicators signify the inflationary pressures that are contributing to the volatility in the crypto market, particularly affecting Bitcoin prices.

In light of the aforementioned scenarios, institutional support for cryptocurrencies through financial instruments like spot Bitcoin and Ethereum ETFs in the US appears bleak. After a significant correction on Wall Street, a drastic outflow was seen from US spot Bitcoin ETFs, which reported outflows amounting to $161 million on Tuesday, marking a consecutive five-day streak of outflows. Comparatively, debut spot Bitcoin and Ethereum ETFs in Hong Kong saw a paltry $12 million in trading volume on their first day, which is significantly lower than what was witnessed in the US Bitcoin ETF debut. This series of events underscores institutional investors’ dwindling confidence in cryptocurrency ETFs, hinting at their reluctance to invest further unless positive developments surface.

According to Coinglass data, the crypto market selloff led to over $475 million in liquidations, with more than $420 million tied to long positions and over $55 million in short positions. Over 145K traders were liquidated in this process, highlighting the market’s volatility and the high-risk nature of cryptocurrency investments.

Veteran traders and analysts are predicting further declines for Bitcoin, with forecasts suggesting a dip to the higher $40,000 levels before any potential market recovery. Crypto analyst Michael van de Poppe suggests that Bitcoin is nearing the end of its correction phase and may fall to lows of $56-58K. On a more bearish note, Peter Brant suggests that Bitcoin’s price could dip into the high $40s before the bull market resumes, possibly extending till 2025.

As the crypto market navigates through these tumultuous waters, investors and entities remain watchful, anticipating the Federal Reserve’s next moves and the economic indicators that will shape the future of cryptocurrency prices. The market’s current state serves as a stark reminder of the volatile nature of cryptocurrencies and the myriad of external economic factors that can significantly influence their value.