Bitcoin (BTC) is consolidating in the mid-$57,000s, down around 5% for the day but up about 1.5% or $1,000 from earlier session lows. This uptick comes as traders digest the Federal Reserve’s latest policy announcement and its potential impact on rate cuts this year.
The Fed held interest rates at a multi-decade high of 5.25-5.5% and eased its balance sheet reduction pace. The central bank will now allow its asset portfolio to shrink by only $25 billion per month, a significant decrease from the prior rate of $60 billion per month. This reduction, smaller than expected, may have triggered a dovish response in the markets.
Bitcoin initially surged to the mid-$59,000s, with a similar rally in U.S. stocks, but both gains quickly reversed. As of now, Bitcoin is trading near the level it was at before the Fed’s announcement.
Fed Chair Jerome Powell acknowledged that inflation has been higher than expected this year, reinforcing the Fed’s cautious approach to interest rates and monetary policy.
According to CME data, the implied odds from the money markets that the Fed will cut interest rates by 25 basis points by September increased to 54%, up from 46% just a day earlier. In contrast, the probability of no rate cuts this year dropped to 16% from 27%.
Overall, the market’s interpretation of the Fed’s meeting was slightly more dovish than anticipated, contributing to the rebound in Bitcoin prices from earlier lows.
What’s Next for Bitcoin Prices?
Despite Bitcoin’s rebound from earlier session lows, recent technical indicators point to a likely continuation of its downward trajectory.
Leading up to Wednesday’s Fed meeting, Bitcoin had already declined nearly 5% from just under $61,000. This dip was preceded by a 5% drop on Tuesday from near $65,000.
The pullback from early-week highs coincides with growing concerns over persistent inflation in the US and an uptick in ETF outflows.
According to data from The Block, US Bitcoin ETFs have experienced outflows for five consecutive days, indicating that investor sentiment may be turning bearish.
![](https://sollcrypto.com/wp-content/uploads/2024/05/Screen-Shot-2024-05-02-at-7.08.15-AM.png)
inflation pressures, alongside accelerated ETF outflows. Source: The Block
Significantly, Wednesday’s downturn caused Bitcoin to break below its two-month trading range of roughly $60,000 to $74,000.
![](https://sollcrypto.com/wp-content/uploads/2024/05/Screen-Shot-2024-05-02-at-7.08.55-AM.png)
A chorus of analysts, including those at Standard Chartered, are now forecasting that Bitcoin could drop to the low $50,000s.
Standard Chartered suggests that Bitcoin may fall 13% to $50,000 after breaking below a key support level, indicating a slowdown in macroeconomic drivers. With Bitcoin dipping below the typical purchase price for ETFs, roughly around $58,000, more than half of ETF positions are now underwater.
Ajay Bagga (@Ajay_Bagga) mentioned this on Twitter on May 1, 2024.
Several analysts have pointed out that the average entry price for US Bitcoin ETF buyers is around $57,300, a critical level to watch.
Markus Thielen, CEO of 10x, noted that many “TradeFi” investors might have entered the crypto market, pushing long positions ahead of the Bitcoin halving event. “That phase is now over,” he wrote.
“We expect more selling pressure as Bitcoin trades below $57,300,” Thielen added. “This could lead to a correction of about -25% to -29% from the $73,000 peak,” supporting Standard Chartered’s price target of $52,000 to $55,000 for Bitcoin in the next three weeks.