(Kitco News) – It was a day of recovery for financial markets as cryptos and stocks rebounded from yesterday’s Fed-inspired pullback, with investors brushing aside concerns regarding interest rate hikes and cuts to buy the dip on their favorite assets.
The uptick in stocks comes as “traders anticipate further corporate earnings reports and key labor market insights later in the week,” said analysts at Secure Digital Markets. “This follows a mixed session on Wall Street, reacting to the Fed's decision to maintain interest rates and to taper quantitative tightening more than expected – from a $60 billion monthly redemption cap on Treasuries to $25 billion – a move interpreted as a moderation in policy that could benefit risk assets like stocks and cryptocurrencies.”
Wednesday marked the sixth consecutive FOMC meeting where the Fed held rates steady, falling in line with expectations, but there were some interesting comments from Fed Chair Jerome Powell in the post-meeting presser.
“On the one hand, the Fed statement highlighted a ‘lack of further progress toward the Committee's 2% inflation objective’ but also noted that risks to achieving employment and inflation goals ‘have moved toward better balance over the past year,’” said market analyst Bloodgood. “That’s basically just a stereotypical example of mixed signals, but more importantly, Powell made it clear that the next rate move is likely to be a cut, not a hike.”
That signaled traders to reenter the market as stocks and cryptos climbed higher on Thursday while the DXY and U.S. 10-year Treasury yield trended lower.
At the closing bell, the S&P, Dow, and Nasdaq finished up 0.91%, 0.85%, and 1.51%, respectively, while the DXY fell 0.38%, and the 10-year treasury yield dropped by 105 basis points to 4.583%.
Data provided by TradingView shows that Bitcoin (BTC) spent the day clawing its way higher from support at $57,000, hitting a high of $59,590 in the afternoon before pulling back to support at $59,000.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $59,090, an increase of 3.2% on the 24-hour chart.
Interesting times ahead
Bitcoin’s drop below $60,000 prompted Bloodgood to review some of his previous analyses.
“First, we discussed that if we drop below the previous ATH (around $69,000), we would see $60,000, which happened fairly quickly,” Bloodgood said. “Then we discussed that $60,000 is a MUST hold or else we will test levels well below $60,000.”
“A series of lower highs and lower lows was followed by a breakdown, which was driven in part by bearish ETF flows and a dump in stocks,” he added. “But whatever the narrative behind it, what matters are the charts and how we will play it.”
Bloodgood said what matters now is Bitcoin’s weekly close. “We are in for an important weekly close this week as closing below $60,000 means we are one step closer to the weekly support at $51,800. Dropping down there means ultimate pain for altcoin markets.”
“On the other hand, if buyers step in here and this becomes a fake breakdown, we could see a big bounce towards $65,000,” he concluded. “Either way, interesting times ahead.”
Market analyst Rekt Capital noted that the current pullback occurred in the “post-halving ‘danger zone (purple),’” and warned that there could still be further downside based on historical price action.
“Bitcoin has once again repeated 2016 history in this cycle by recently deviating to the downside below the current Re-Accumulation Range Low,” Rekt Captial said. “In 2016, this deviation was -17%, whereas in 2024, this deviation is -6% thus far.”
He added that the downside wick in 2016 lasted “approximately 21 days after the Halving before reversing towards the upside,” which means Bitcoin has eight more days in the danger zone, so its price action could remain volatile.
MN Trading founder Michaël van de Poppe agreed with this outlook, saying that he expects Bitcoin to trade sideways for a spell, and while another 5-10% drawdown could happen, “most of the downside is done.”
It's going to take a while for #Bitcoin.
However, most of the downside is done.
There might be another 5-10% correction, but from here, altcoins are going to take over until Bitcoin breaks the all-time high. pic.twitter.com/sejObsUuzz— Michaël van de Poppe (@CryptoMichNL) May 2, 2024
Altcoins bounce back
There was a broad recovery in the altcoin market, with all but a dozen tokens in the top 200 recording gains on Thursday.
Daily cryptocurrency market performance. Source: Coin360
Arweave (AR) led the field with an increase of 22.6% to trade at $34.88, followed by a gain of 15.4% for Jito (JTO), and a climb of 13.75% for Centrifuge (CFG). ZetaChain led the losers after being the top gainer for two days, falling 11.4%, while Heder (HBAR) fell 4.11%, and Nervos Network (CKB) declined by 2.7%.
The overall cryptocurrency market cap now stands at $2.21 trillion, and Bitcoin’s dominance rate is 52.7%.