(Kitco News) – Tuesday opened with red across financial markets with Bitcoin (BTC), altcoins, stocks, gold, silver, and oil all trending lower. At the same time, the DXY and U.S. 10-year Treasury yield spiked, all in response to yet another hotter-than-expected inflation reading – this time from the U.S. Bureau of Labor Statistics.
According to the new data release, the employment cost index rose 1.2% from December to March, the highest increase in a year, after rising 0.9% at the end of 2023. Wages and salaries also increased by 1.1% over that same three-month period, along with a 1.1% increase in benefit costs.
The negative reaction to the data indicates that market watchers are concerned that persistently high wages are keeping inflation levels elevated, which will further push back a potential rate cut.
Investors have also limited their activity ahead of this week’s Federal Open Market Committee meeting (FOMC), which starts today and runs through Wednesday. It’s widely expected that the Fed will hold interest rates steady, and the CME FedWatch tool shows that most participants don’t expect a cut before September at the earliest.
Data provided by TradingView shows that Bitcoin rallied to a high of $64,745 in the early hours of Tuesday following the launch of spot BTC ETFs in Hong Kong. But trading volumes were lower than expected, and Bitcoin’s price reversed course and has been in down-only mode since that time, hitting a low of $60,510 and looking poised for further losses.
BTC/USD Chart by TradingView
With the halving and spot BTC ETF launches now in the rear-view mirror, analysts see few catalysts on the horizon that could lift the market out of its current funk, and they warn that a visit to the $50,000 range could be in the cards for Bitcoin.
Last week marked the “fourth consecutive week of price declines for BTC, following a record-breaking streak of seven consecutive months of growth,” said Matteo Greco, Research Analyst at Fineqia International. “Throughout the week, BTC experienced minimal volatility, maintaining a steady and gradual decline, resulting in five out of seven days seeing a decrease in price, culminating in the observed 2.8% decline by the week's end.”
The way this week is going, the streak could extend to five weeks of losses as macroeconomic concerns continue to mount.
“The recent downtrend can be attributed to increased profit-taking by investors who entered the market during the downturns of 2022 and 2023, as well as ETF investors who witnessed significant price appreciation on their shares after entering the market in the early weeks of 2024,” Greco said.
Coinciding with the weakness in Bitcoin’s price has been “stagnant demand for BTC ETFs,” which continued “a short-term trend observed over the past five weeks, with neutral flow in these financial products,” he added. “ETFs with BTC as the underlying asset experienced approximately $325 million in outflows during the week, following the $205 million outflows observed the week prior. This marks the third consecutive week of net outflows for BTC ETFs.”
“Trading volume for BTC ETFs also decreased during the week, with cumulative trading volume since inception reaching $235.7 billion,” Greco said. “The total trading volume during the week was $9.7 billion, with a daily volume of about $1.9 billion. This reflects a significant decrease in trading activity compared to previous weeks, with an average daily trading volume since inception of about $3.1 billion.”
Many market watchers see the Security and Exchange Commission’s (SEC) upcoming decision on several spot Ether (ETH) ETF applications as a possible market-moving catalyst, while others expect the regulator to withhold approval for these products despite the approval of BTC ETFs in January.
“Concerns over the liquidity of ETH's spot and futures markets, as well as its classification as a security by the SEC in the past, contribute to the skepticism surrounding prompt approval,” Greco said. “In the event of rejection, issuers would need to resubmit filings and restart the approval process, potentially leading to approval in Q4 2024 or Q1 2025 in the best-case scenario.”
All things considered, the crypto market has performed in a manner similar to post-halving periods, and the weakness seen is not necessarily attributed to any specific macroeconomic development.
“The current market trends are consistent with historical cycles, as the recent halving event has led to short-term downward price movements, a pattern observed in previous occurrences,” Greco concluded. “Following this, there is typically a 9–12-month period of upward momentum, leading to the peak of the market cycle. If history repeats itself, we may see the current market cycle reaching its peak between Q4 2024 and the first half of 2025.”
