The Impact of Federal Reserve on Bitcoin
As a crypto enthusiast, you have witnessed a significant selling pressure in the Bitcoin market due to the Federal Reserve’s announcement of maintaining higher interest rates for a longer period. This has resulted in substantial outflows from Bitcoin investment products, totaling $620 million last week. Moreover, Bitcoin ETFs have faced notable losses recently. The dynamics of the market are shifting, and it is crucial to understand the implications of these developments on Bitcoin’s movement in the upcoming weeks.
Decoding the Realized Price
Amidst these turbulent times, on-chain data indicates that Bitcoin is approaching the “Realized Price” of short-term holders, which holds historical significance for BTC. According to Julio Moreno, CryptoQuant’s Head of Research, the Realized Price tracks the average acquisition price of coins by short-term holders (those who purchased within the last 155 days).
- This Realized Price metric represents the average cost at which investors bought Bitcoin.
- When Bitcoin’s spot price surpasses this indicator, holders are in profit; if it falls below, dominance is lost.
- Currently, Bitcoin’s spot price is close to the Realized Price for short-term holders, indicating a narrowing profit margin for these investors.
Historical Importance of Realized Price Retests
Looking back, retests of the short-term holder Realized Price have been crucial for Bitcoin’s price action. Moreno’s analysis reveals that over the past two years, Bitcoin’s price has interacted with this level multiple times, leading to different outcomes.
- During instances marked with green circles, Bitcoin found support at this level and continued its bullish trend.
- Conversely, in instances marked with red circles, Bitcoin failed to hold the level, resulting in declines ranging from 8% to 12%.
Market Sentiment and Potential Catalysts
Henrik Andersson, the Chief Investment Officer at Apollo Crypto, suggested that waning interest in spot Bitcoin exchange-traded funds could be contributing to the market’s downturn, although the exact cause remains unclear. While Bitcoin had a relatively stable weekend around $66,000 before a sudden spike to over $67,200 on Monday, a subsequent sell-off brought it down to $64,000.
The market’s response to this critical level will determine whether Bitcoin bounces back or faces further declines, potentially dropping to $60,000. External factors such as Federal Reserve policies and investor sentiment towards Bitcoin ETFs continue to influence Bitcoin’s short-term trajectory.
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