Bitcoin’s price took a hit, dropping to $57,300, as investors remained uncertain about the upcoming Federal Reserve announcement. This caused permanent holders and whales to reduce their demand, leading to market expectations of a decline. As a result, Bitcoin and other cryptocurrencies experienced a significant downturn, reaching their lowest levels in over two months. This decline coincided with a broader market pessimism as investors awaited the Federal Reserve’s decision on interest rates. Bitcoin’s price dipped below $57,000 for the first time since late February, reflecting a decline of nearly 4.5%.
Investors are feeling anxious as they await the Federal Reserve’s decision on interest rates. The market eagerly awaits the Fed’s comments on future rate increases and the direction of monetary policy, as they desire insights into potential changes in economic policy. Market participants will closely analyze Jerome Powell’s speech for any hints of interest rate cuts that could impact various asset classes, including cryptocurrencies.
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 large investors, known as “whales.” Permanent holders have cut their monthly growth by 50%, dropping 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%, indicating a shift in market dynamics.
According to Matteo Greco, a Research Analyst at Fineqia International, the increased selling pressure from long-term holders often serves as an indicator of broader market expectations of a downturn. This sentiment is reinforced by the decrease in demand, as seen in the sharp decline of 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 decreased.
Adding to the downward pressure on Bitcoin’s price is the 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. Miners’ selling activity further exacerbates the downward price movements in the cryptocurrency market.
Despite the anticipated positive impact of 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 based on the short-term holders’ realized price, which falls around $63,000. According to CryptoQuant, this level is 10% below the current realized price of short-term holders and has historically served as the ultimate support for prices during bull markets.
Bitcoin has shown resilience in its price movements historically, with reversals occurring around key realized price levels. For example, in January 2024, Bitcoin’s price bottomed out after declining to the short-term holders’ realized price levels of around $38,500.