Analysts expect Bitcoin price recovery after Fed leaves rates unchanged.
Bitcoin (BTC) prices rebounded on May 2 after the US Federal Reserve decided to leave interest rates unchanged, dampening investors' hopes for a rate cut in 2024.
Federal Open Market Committee (FOMC) minutes released on May 1 said the Fed would hold interest rates at 5.25%-5.50%, saying it needed “greater confidence that inflation is sustainably moving toward 2%” before cutting rates.
The Fed said it plans to slow the pace of balance sheet reduction — known as quantitative tightening (QT) — from $60 billion a month to $25 billion a month.
“Beginning in June, the Committee will reduce the monthly redemption rate on Treasuries from $60 billion to $25 billion, slowing the rate of decline in securities holdings.”
Market analyst and X user Fejaw said the FOMC press release sent mixed signals, dovish on the balance sheet and hawkish on rate cuts.
However, the FOMC decision appears to have boosted risk appetite and asset prices. BTC prices began to decline minutes after the news, rising more than 3% in the past 24 hours to trade at $59,077 at press time.
Bitcoin's price rose to $59,482 on May 2, prompting market participants to wonder if the downtrend is over.
Bitcoin price is repeating the cycle of 2016.
The latest price drop saw Bitcoin hit its lowest level in two months, halving its value by 6.7%.
According to Rec Capital, a prominent trader and analyst on recent BTC price action, the cryptocurrency has followed a similar trend since the 2016 Bitcoin halving.
“Bitcoin has repeated the history of 2016 in this cycle by moving to the downside below the current retracement range low.”
After the 2026 halving event, the “Restock Range” has seen “further corrections” of up to 17%, lasting up to three weeks.
“So far, this difference is -6%,” added Rect Capital, adding that the price of BTC could fall further, as normal cyclical events still exist.
How deep is it? he said.
“The answer is not very deep and it won't be long before Bitcoin finally goes down.”
The value of Bitcoin is supported by “population”.
A closer look at on-chain metrics provides valuable insights into Bitcoin's recovery following the drop to $57,000.
An important metric to consider is the short-term holder's market value to fair value (STH MVRV) ratio, which, according to data from Santiment, is currently -6%.
This ratio basically compares the current price at which Bitcoin is trading (market price) to the average price at which the coins last moved (realized price).
According to a market intelligence firm, markets are most efficient when the MVRV ratio is in negative territory.
Another measure that indicates the possibility of a market collapse in the short term is the number of trades that are moving at a loss compared to those that are moving at a profit.
The chart below by Santiment shows that the ratio of BTC trades in losses is higher than trades in profits.
“This usually correlates well with bottoms, because that's a major sign of crowding.”
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
