Bitcoin Post-Halving Faces Decline and Volatility with Macroeconomic Factors
- Bitcoin experienced a 14%
drop in April, with prices falling to a two-month low following the Federal
Reserve's decision to maintain interest rates.
- Retail investors played a significant role in the sell-off, while the market awaits the US Nonfarm Payrolls report for further direction.
Worst Monthly Performance Since November 2022
Bitcoin's trajectory this week has been marked by a notable decline, with several factors contributing to its downward momentum. The cryptocurrency has experienced its worst monthly performance since November 2022. This week, Bitcoin's fall was below $57,000, the lowest level in over two months, following the Federal Reserve's decision to maintain interest rates while correcting after the NFP data showed a slowdown in job growth.
Higher Rates Drag Price Down to $50K Threat
Several factors have been identified as contributing to the recent price decline. The introduction of spot Bitcoin ETFs in Hong Kong has had mixed implications for the market. Additionally, deteriorating liquidity measures in the US and higher real interest rates have likely supported the dollar, which in turn has weighed on Bitcoin.
The cryptocurrency market is also still reeling from the recent Bitcoin halving event, which historically has been followed by sluggish market responses.
Retail investors played a significant role in the sell-off, more so than institutional investors, according to a report by JPMorgan. This suggests a shift in market dynamics, with individual traders potentially reacting more strongly to market uncertainties. The risk of a potential "bull trap" in the market is still valid while there has been a slight recovery, Bitcoin could still face a further decline to around $50,000.
Rebound on NFPs, Fed & Macro in Focus
Despite the midweek rout that saw Bitcoin fall below $57,000, it managed to recover, hovering around $61,000 towards the end of the week after the release of the US Nonfarm Payrolls (NFP) report.
In the context of macroeconomic factors, Bitcoin's price movements have also been influenced by inflation, rising interest rates, and a stronger US dollar earlier in the year. These factors have given traders reasons to reduce their Bitcoin positions, leading to corrections in the market after significant rises in 2024.
Overall, Bitcoin's decline and volatility this week can be attributed to a combination of market reactions to the Federal Reserve's interest rate decision, the impact of new financial products like Bitcoin ETFs, liquidity concerns, and macroeconomic factors like the NFP report.