(Kitco News) – Asset prices stumbled in trading on Tuesday as tomorrow’s conclusion of the Federal Open Market Committee meeting and the Fed’s decision on interest rates dominated news headlines and investors' minds amid concerns that 2024 could see no rate cuts – and potentially a rate hike.
“In response to escalating inflation, Democratic lawmakers are urging the Federal Reserve to contemplate interest rate cuts,” said analysts at Secure Digital Markets. “They argue that the current tight monetary policy exacerbates inflationary pressures and advocate for a more accommodative stance to support economic expansion. This plea arises amidst internal Federal Reserve debates concerning the appropriate response to inflationary trends and broader economic indicators.”
Despite the pleas from lawmakers, the CME FedWatch tool shows that the odds of rates staying the same this month are 99.4%.
“While no one is expecting an interest rate change for the FOMC, the crucial thing will once again be the Fed’s signaling regarding potential cuts in July and September,” said market analyst Bloodgood. “This will be important because the odds for the September 18 Fed meeting are split very close to 50/50 between a cut (with almost 5% for two cuts) and holding rates steady. If there are any comments or inflation data that influence these odds, that will show up in the charts as well.”
Stocks fell under pressure at the open but managed to claw their way higher as the day progressed. At the closing bell, the S&P and Nasdaq were in the green, up 0.27% and 0.88%, while the Dow lost 0.31%.
Data provided by TradingView shows that after losing support at $69,500 and falling 5% to support near $66,000 in the morning, Bitcoin’s (BTC) price rebounded in the afternoon and climbed back above $67,400.
BTC/USD Chart by TradingView
“Bids are accumulating within the range of 66,000 to 66,500, while sell orders are also forming between 68,000 and 68,500,” said Secure Digital Markets. “Given the morning surge in the stock market, there's an expectation for Bitcoin to potentially mirror this trajectory.”
At the time of writing, Bitcoin trades at $67,431, a decrease of 2.87% on the 24-hour chart.
Typical post-halving chop
“We’ve had a choppy Q2 so far, but that’s not surprising given how Bitcoin’s seasonality has developed over the years,” said Bloodgood. “Typically, Q2 and Q3 are way worse than Q1 and Q4, which has in part led to the popular adage ‘sell in May and go away’ being applied to crypto.”
“To be exact, though, it should be ‘sell a bit before May,’ since BTC tends to have worse performance in May compared to the S&P 500, where selling in May would make more sense,” he added. “In any case, I would caution against putting too much weight on seasonality – especially with an asset class that’s been around for a relatively short time and whose market dynamics have been transformed drastically multiple times within that short history – but it’s just one datapoint among others to consider.”
“We all know that summer isn’t the most exciting time for crypto anyway, but it’s worth noting that ETFs could further strengthen Bitcoin’s correlation with stocks, which isn’t a bad thing given that we’re in an election year, when Q3 seasonality is significantly better for equities,” Bloodgood said. “If you’re waiting for some headlines to get us out of this chop, then this week is a good time to pay attention. We’ve got the May CPI and a FOMC meeting tomorrow, with PPI coming in on Thursday.”
Addressing Tuesday’s price drop, Bloodgood noted “We woke up to see another fakeout as the BTC price dropped way below the breakout level.”
“Those who read last week’s issue were warned about a potential fakeout, and it happened again,” he said. “If you want to be safe, you will wait for weekly confirmations. At the time of writing, Bitcoin is trading around $67,000 after printing a double top pattern on the weekly chart, which is usually a strong bearish signal.”
“On the daily, we can see a clean breakdown and almost no fight from the bulls, since there was no bounce from the drop that happened a few days ago,” Bloodgood observed.
“The next target here is the daily support that lies at $64,650, and in case we test it, we will want to see a strong bounce off it. If not, we could have a miserable summer.”
MN Trading founder Michaël van de Poppe said he thinks the real bounce back in the crypto market will come after the conclusion of the FOMC meeting.
“After the previous FOMC meetings, the markets quickly rebounded,” he noted. “Ethereum has made multiple bounces of twenty percent after the previous meetings, while Bitcoin has surged by more than twenty percent since the recent meeting of the FED.”
He added that the conclusion of the last Fed meeting “marked the end of the correction after two months as Bitcoin quickly surged from $57,000 to a test at all-time highs.”
It’s a big week for the markets, as tomorrow the markets will receive the new CPI data & interest rate decisions from the FOMC.#Bitcoin and crypto almost always correct before the event, and return upwards after.
In the previous months, the same price action took place.— Michaël van de Poppe (@CryptoMichNL) June 11, 2024
Market analyst Crypto Mikey was less optimistic, highlighting that Bitcoin has been stuck in a range since March and shows no signs of breaking out higher.
“Unfortunately this range will likely continue until the FED cuts rates,” he warned.
Altcoin plunge into the red
The pullback by Bitcoin amplified the downturn in the altcoin market, with only a half dozen tokens in the top 200 managing to post gains on Tuesday.
Daily cryptocurrency market performance. Source: Coin360
Top performers were limited to gains of less than 3%, with Ondo (ONDO), Oasis (ROSE), and Stacks (STX) increasing 2.5%, 2.3%, and 1.6%, respectively. Meme token cat in a dogs world (MEW) was the biggest loser, falling 18.6%, while MANTRA (OM) fell 15%, and ConstitutionDAO (PEOPLE) lost 14.2%.
The overall cryptocurrency market cap now stands at $2.44 trillion, and Bitcoin’s dominance rate is 54.4%.
