Bitcoin and the majority of cryptocurrencies have experienced a significant downturn over the past few days, particularly since last week following the announcement of positive economic data from the United States.
This announcement led to a notable rise in the US Dollar, causing risky assets like cryptocurrencies to decline. Current predictions suggest that most risky assets may continue to drop, mirroring last week’s movements and maintaining a negative outlook until the weekend.
US Economic Data Announcement
The latest negative sentiment in the cryptocurrency market stems from the announcement of US economic data. This data includes inflation figures and the results of the Federal Open Market Committee (FOMC) meeting, a committee that determines the monetary policy of the US Federal Reserve.
Today, the US is set to release inflation data, specifically core inflation and general inflation figures. Annual general inflation is expected to remain stagnant, while annual core inflation is predicted to decrease. Monthly core inflation is forecasted to stay unchanged, alongside a predicted decline in monthly general inflation.
Given this data, there is potential for positive sentiment towards the US economy, which is seen as beginning to recover, thereby providing a positive sentiment for the US Dollar. However, the CPI data indicates that consumer inflation remains relatively high, resulting in mixed sentiments within financial markets. Overall, considering these data predictions, there is a strong likelihood that the prices of most risky assets, including cryptocurrencies, will continue to decline.
This situation could be exacerbated by the announcement of the interest rate decision and the FOMC meeting results. The current forecast suggests that the interest rate will remain steady at 5.5%, which could provide a generally positive sentiment. Nevertheless, short-term volatility is expected to increase significantly, making the coming days less favourable for trading. In the long term, this situation could be beneficial as, following the conclusion of data publications, there is a possibility that the prices of most cryptocurrencies could recover.
The data releases will culminate with the producer inflation data, expected to decrease, and the unemployment data also predicted to decline. Overall, these data releases will contribute to high volatility until the end of the week, maintaining the possibility of a correction, albeit small.
Bitcoin’s Potential Downtrend
Currently, Bitcoin’s price appears to be exiting its appreciation zone since May 2024.
Daily BTCUSD Chart
Tonight’s price movement will be crucial; if Bitcoin continues to fall, the correction could remain strong through the weekend. With the lack of a comprehensive positive sentiment from the cryptocurrency market itself, Bitcoin is expected to keep declining. This decline is marked by high volatility and low transaction volume, posing a challenging environment.
As long as the lower boundary at $66,800 is maintained, there is a chance for Bitcoin to rebound. However, if this support level is breached, Bitcoin may drop to around $58,000 in the coming weeks. The overall market conditions, particularly the actions of institutional investors, will play a significant role, and unfortunately, these investors have yet to show significant buying volume.
Therefore, traders and investors are advised to remain cautious and view the potential correction as a buying opportunity. In the long term, the possibility of a bull market pattern remains, considering global liquidity cycles. However, all transactions should be paired with good risk management to take advantage of the momentum and sustain a presence in the cryptocurrency market for long-term optimal gains. Each investor is responsible for their own risk.
Conclusion
In conclusion, the current market conditions suggest a cautious approach for Bitcoin and other cryptocurrencies. With significant economic data releases and the FOMC meeting on the horizon, increased volatility is expected in the short term.
However, this period of correction could also present buying opportunities for those who manage their risks effectively. Long-term prospects still hint at a potential bull market, underpinned by global liquidity cycles. Investors should stay vigilant, leveraging these fluctuations to optimise their positions while navigating the inherent risks of the crypto market
