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Why Bitcoin Price Dropped Today? When Will It Recover?

Bitcoin price fell to $56K today as traders book profits in anticipation of hawkish Fed, will investors by the dip for crypto market recovery.
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Why Bitcoin Price Dropped Today? When Will It Recover?

Highlights

  • Bitcoin price has officially entered in a bear market as it is now down over 20%.
  • Investors loses another $210 billion as crypto market cap tumbled from $2.34 trillion to $2.13 trillion.
  • Hawkish U.S. Federal Reserve retreat from three interest rate cuts this year is primary reason for the crash.
  • Bitcoin price to rebound from $50K-$52K range.

Bitcoin price is officially in a bear market as it is now down over 20% after falling for three consecutive days this week. Investors pulled money out of the crypto market in anticipation of hawkish U.S. Federal Reserve retreat from three interest rate cuts this year.

Stagflation and sticky inflation concerns continue to mount amid no signs of slowing inflation and slow economic growth. The recent PCE data indicated persistent inflationary pressures and Q1 GDP growth of 1.6% showed stagflation. Today’s Fed monetary policy decision and Chair Jerome Powell are crucial for the stock and crypto markets as investors brace for market crash jitters.

A recovery in Bitcoin price and broader crypto market is expected when macro pressure eases, institutional buyers returns, and technical chart patterns show early signs of reversal.

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Bitcoin Price Falls Over 10% to $56K

BTC price fell over 10% in a day amid panic selling by retail investors after institutional investors considered rising risks to stay away from risk assets. Bitcoin currently changing hands at $57,000. The 24-hour low and high are $56,555 and $62,121, respectively. Furthermore, the trading volume has increased by 70% in the last 24 hours.

Bitcoin is now down 22% from the all-time high of $73,803 in March, technically putting it in a bear market. But it is still up 35% year-to-date and double where it was this time last year due to large money inflow into spot Bitcoin exchange-traded funds (ETF) since January. As demand wanes from spot Bitcoin ETF and investors didn’t see any factors for a recovery, they started booking profits, which triggered a broader crypto market selloff.

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Macro Pressure Mounts

The US dollar index (DXY) rose to around 106.4 on Wednesday, marching again toward six-month highs as investors brace for key monetary policy decisions from the U.S. Federal Reserve. The Fed is expected to keep interest rates unchanged amid strong US economic data and hot inflation. However, traders are focusing more on Fed Chair Jerome Powell’s guidance on rate cuts this year.

The US 10-year Treasury yield (US10Y) also approached a 6-month high as it jumped further to 4.67%. It rose further after data showed US labor costs grew more than expected resonating that the Fed needs to keep interest rates higher for longer.

Bitcoin price moves in the opposite direction to DXY and US 10-Yr Treasury yield.

“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,” said Fineqia research analyst Matteo Greco to Reuters.

Also Read: Binance Adds JTO, NFP, MANTA, & Others As Loanable Assets

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Over $500 Billion Crypto Liquidation

The crypto market cap tumbled from $2.34 trillion to $2.13 trillion, causing investors to lose another $210 billion after a massive $250 billion liquidation in the last few days.

Coinglass data shows more than $475 million were liquidated across the crypto market in the selloff. Among them, $420 million long positions were liquidated and over $55 million short positions were liquidated.

Over 145K traders were liquidated and the largest single liquidation order happened on crypto exchange OKX as someone swapped ETH to USD valued at $6.07 million.

Source: CoinGlass

Analysts expect a major rally in Bitcoin price to start from below $50K and but whale accumulation could change the level for the rally near $54K, as per analyst Michael van de Poppe. The final recovery in the market could start after the May 31 options expiry.

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Varinder Singh

Varinder has over 10 years of experience and is known as a seasoned leader for his involvement in the fintech sector. With over 5 years dedicated to blockchain, crypto, and Web3 developments, he has experienced two Bitcoin halving events making him key opinion leader in the space. At CoinGape Media, Varinder leads the editorial decisions, spearheading the news team to cover latest updates, markets trends and developments within the crypto industry. The company was recognized as Best Crypto Media Company 2024 for high impact and quality reporting. Being a Master of Technology degree holder, analytics thinker, technology enthusiast, Varinder has shared his knowledge of disruptive technologies in over 5000+ news, articles, and papers.

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