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Investor pessimism hit hard ahead of the next Federal Reserve meeting. Bitcoin and Ethereum Stiff.
As of this writing, BTC is down 7.6% and ETH is down 6% in the last 24 hours. Bitcoin price is hovering around $57,000, while Ethereum price is hovering just below $2,900, according to data from CoinGecko.
For derivatives traders, volatility was hellish. According to CoinGlass, $457 million worth of cryptocurrency futures positions were liquidated in the last 24 hours. And $392 million of that was long-term contracts.
Traders who open a futures contract are essentially betting on future price action. When you buy an asset, you are betting that its price will rise. And what it lacks is confidence that it will go down.
And it’s not just blue chips like Bitcoin and Ethereum that have been affected. Price declines are widespread throughout the market. In fact, among CoinGecko’s top 100 cryptocurrencies by market capitalization, only a handful of assets have escaped the Red Sea, excluding stablecoins that maintain pegs, such as Tether (USDT) and Circle’s USDC.
The U.S. Federal Open Markets Committee is scheduled to announce its interest rate decision today at 2 PM ET, and Federal Reserve Chairman Jerome Powell is scheduled to hold a press conference at 2:30 PM. Back in February, investors seemed confident that May would be the month in which the FOMC would finally cut interest rates. This is usually a bullish signal for risky assets like Bitcoin.
That’s because lower interest rates often lead traders to exit U.S. Treasury bonds to take profits in riskier assets such as stocks and cryptocurrency assets.
The Fed’s benchmark interest rate is currently at its highest level of 5.25-5.5% and has remained unchanged since July 2023 as the central bank aims to curb inflation. Policymakers have been closely watching inflation, currently at 3.5%, with hopes of bringing it closer to 2% before considering rate cuts. But this is becoming a distant hope as inflation last month rose to its highest since September.
Traders had some hope in March when the Swiss central bank announced it was cutting interest rates. “For several months, inflation has fallen back below 2% and is therefore within the range that the SNB equates with price stability,” the central bank wrote in its decision at the time. But Swiss sentiment does not appear to have spread to other major central banks.
Just a month ago, traders seemed confident the Fed might cut interest rates in June, according to the CME Fed Watch tool. But the feelings faded. Traders do not expect the Federal Reserve to cut interest rates until December. A majority of 75% even seem to think so.
