Bitcoin and Ethereum have rebounded after starting yesterday morning nearly 10% lower than they were on Tuesday.
At the time of writing, the Bitcoin price is around $57,700 after having made a 0.5% recovery in the past 24 hours. And the Ethereum price, after climbing 2.3% in the past day, is now trading for just below $3,000, according to CoinGecko data.
But the damage has still been done. Per CoinGlass, the past 24 hours saw another $193 million worth of crypto futures contracts liquidated, adding to the $300 million worth of liquidations seen earlier this week.
Economist and trader Alex Krüger explained that this current cycle feels so different for traders because it’s largely been driven by interest in spot Bitcoin ETFs, which only just started trading in January this year.
“There has been barely any new retail coming into crypto,” he wrote on Twitter. “It’s been mostly ETF buyers and previous cycle participants redeploying and going out the risk curve.”
Analysts mostly attributed crashing crypto prices to fear in the market over certainty among investors that the Federal Open Markets Committee—which sets monetary policy and controls U.S. federal interest rates—would not lower rates. Then the Fed did exactly what the majority of investors thought it’d do by keeping interest rates unchanged, and crypto assets traded sideways.
Some thoughts on the current crypto cycle
#1 The crypto cycle has been almost entirely driven by the bitcoin ETF.
#2 ETH has been a major disappointment, but it has performed well overall for stakers and airdrop farmers.
#3 Solana established itself as the chain of choice for…
— Alex Krüger (@krugermacro) May 1, 2024
During a press conference yesterday, Federal Reserve Chair Jerome Powell told reporters that the fight to get inflation to 2% has been difficult, but added that he thought it was “unlikely that the next policy rate move will be a hike.”
“I’d say it’s unlikely,” he said, but warned that it was “likely to take longer for us to gain confidence that we are on a sustainable path to 2% inflation.”
But even President Joe Biden has been optimistic that the Fed will still lower rates this year. “I do stand by my prediction that before the year is out, there’ll be a rate cut,” he said during a press conference in Japan last month. “This may delay it a month or so, I’m not sure of that.”
He was referring to the hotter-than-expected March inflation report that had just been released at the time.
