05.04.202409:46 Forex Analysis & Reviews: Bitcoin caught in the Fed's network

Nothing is eternal under the moon. Interest in specialized exchange-traded funds with Bitcoin as the underlying asset is gradually cooling down, which, coupled with investors' doubts that the halving will continue to drive BTC/USD upwards, leads to the closure of speculative long positions. However, the increase in trading volumes in spot and futures cryptocurrency markets to a record high of $9.1 trillion indicates investors' involvement in the process. According to CCData, spot trading of digital assets has grown by 108% over the year, reaching $2.94 trillion, the highest since May 2021.

Dynamics of Cryptocurrency Trading on Centralized Exchanges

Some are buying Bitcoin, some are selling it, and some are simply withdrawing money from wallets that have been untouched for a long time. The increase in transaction volume alone does not mean that the price will rise. It indicates an increase in the asset's popularity and market stabilization. And why not, when since the beginning of the year, BTC/USD quotes have jumped by 55%?

However, skeptics argue that the token's best days are behind it. Interest in ETFs, which have attracted around $12 billion in net inflows since their launch in January, is gradually waning. Those who wanted them have already bought them. The recent capital outflow confirms this. It's not certain that the upcoming halving in April will push BTC/USD quotes higher.

Capital Inflow Dynamics in ETFs with Bitcoin as a Spot Asset

Historically, doubling the issuance cost of Bitcoin has led to price increases. However, spikes of 80 times in the 12 months after the 2021 halving and 10 times in 2016 occurred in the early days of cryptocurrency existence. The last doubling of issuance cost in 2020 was followed by a surge that ended in a record high of 69,000. However, then, as now, the BTC/USD rally occurred against the backdrop of widespread growth in risky assets due to the Fed's staggering monetary stimulus.

Something similar is happening now. However, while the S&P 500 is heading upward thanks to the strength of the U.S. economy, expectations of significant corporate profits, and hopes for a loosening of the Fed's monetary policy, Bitcoin has only the latter trump card in hand. And it's not all right with it.

Federal Reserve Chairman Jerome Powell believes the Fed doesn't need to rush to lower the federal funds rate. Fed Governor Christopher Waller urges the central bank to delay the start of monetary expansion and reduce its scale. Minneapolis Fed President Neel Kashkari wonders why rates should be lowered in 2024 if inflation continues to accelerate.

FOMC members make the futures market doubt their assessments, which slows down risky assets. And Bitcoin feels it firsthand.

Technically, on the daily chart, there is a high risk of forming a reversal pattern 1-2-3 for BTC/USD. Its combination with the Three Indians is a volatile mix capable of breaking any trend. Therefore, a drop in Bitcoin below 64,500 is a clear reason to form short positions. Longs can be considered above 71,500.