The market continues to consolidate, waiting for guidance on interest rate cuts from the Federal Reserve
At the current rate, the inflow of funds into the spot BTC ETF is expected to drive BTC to reach a historical high on July 31.Author: Bitpush News Mary Liu
Investors are waiting for the Federal Reserve and its upcoming interest rate decision and the Consumer Price Index (CPI) for May, as the cryptocurrency market opened lower this week.
According to Bitpush data, Bitcoin briefly broke the $70,000 mark in the early session, reaching a high of $70,195, but turned lower in the afternoon and returned to the support level around $69,600.
Altcoins mostly fell, with Polymesh (POLYX) leading the gains among the top 200 tokens by market capitalization, up 9.7%; followed by Gnosis (GNO), which rose 8.6%; and Livepeer (LPT), which increased by 5.5%. Wormhole (W) had the largest decline, down 18%; Biconomy (BICO) fell 17.1%; and Echelon Prime (PRIME) dropped 10%.
The total market capitalization of cryptocurrencies is currently $2.53 trillion, with Bitcoin's dominance at 54.1%.
As of Monday's close, the S&P 500, Dow Jones, and Nasdaq indices all rose, increasing by 0.26%, 0.18%, and 0.35%, respectively.
The FedWatch tool from the Chicago Mercantile Exchange shows that traders' expectations for a rate cut by the Federal Reserve in September have decreased from 60% a week ago to 49%.
ETF Inflows Continue
The inflow data for spot Bitcoin exchange-traded funds (ETFs) is relatively optimistic, with $131 million flowing into ETF products on Friday, marking the 19th consecutive day of inflows.
A report from CoinShares indicated that a total of $1.83 billion flowed into U.S.-listed spot BTC ETFs last week, while the net inflow of digital asset investment products listed globally reached $2 billion, bringing the total inflow over the past five weeks to $4.3 billion.
James Butterfill, Head of Research at CoinShares, analyzed: "We believe this shift in sentiment is a direct response to U.S. macro data coming in weaker than expected, which has led to expectations for monetary policy easing. Positive price action has allowed total assets under management (AuM) to surpass the $100 billion mark for the first time since March."
Crypto analyst Timothy Peterson stated on the X platform that if the current pace continues, the inflow rate of spot BTC ETFs could lead to Bitcoin reaching an all-time high by July 31. Additionally, if liquidity continues at the current rate, Bitcoin's price could reach $135,000 by the end of the year.
Short-Term Leverage Spike
Bitfinex analysts hold a contrary view, stating: "The significant inflow into ETFs over the past 20 trading days has helped alleviate pressure on Bitcoin, but in fact, this has not further driven prices up or pushed Bitcoin above the range highs, which is unfavorable in the short term. The opposing view is that traders are executing basis arbitrage trades, holding long spot positions and short perpetual futures to hedge."
As shown in the chart above, the open interest (OI) for Bitcoin and altcoins has remained high. Data from Coinglass shows that the OI for Bitcoin across major exchanges hit a historical high of $36.8 billion on June 6. Despite a price pullback on Friday, OI currently remains above $36 billion.
Analysts noted: "We believe Friday's drop resembles a 'leverage washout,' where a large number of leveraged long positions in altcoins (and to some extent, major currencies) were liquidated, neutralizing the funding rates. However, despite the significant leverage liquidation in altcoins, we do not expect a sharp decline immediately."
On June 7, the amount of long liquidations in the crypto market exceeded $360 million, with total liquidations surpassing $410 million, the highest level since April 14, exceeding the level when Bitcoin fell below $57,000, but this time only $50 million of long liquidations came from Bitcoin.
Analysts explained: "Most of these were altcoins, which explains the significant drop in altcoins relative to mainstream currencies last week. Such liquidation events typically do not trigger further severe declines, so this week will be crucial, as the Consumer Price Index inflation report set to be released on June 12 is expected to be a major market catalyst, with prices likely to continue fluctuating in a tense environment as derivative positions increase again."
Bitfinex believes that maintaining a local low around $68,000-$68,500 for Bitcoin is crucial for bulls in the current environment, and failing to break through the range highs will further pressure the bulls.
Regarding the Federal Reserve's monetary policy, Bitfinex analysts stated that maintaining high interest rates for an extended period is a double-edged sword that requires careful handling:
On one hand, the strength and adaptability of the U.S. economy allow it to thrive even in a high-interest-rate environment, thanks to strong labor demand and rising wages. This situation will support sustained economic growth, robust consumer spending, and overall economic resilience.
On the other hand, keeping interest rates high for too long poses significant risks, which could suppress economic activity, lead to reduced investment, slow job growth, and potentially result in an economic downturn.
Analysts also noted that the recent rate cuts by the European Central Bank and the Bank of Canada were aimed at "shifting towards a more accommodative monetary policy to promote economic growth, indicating that the Federal Reserve may need to reassess its monetary policy, as the actions of its global counterparts could influence its decisions in the coming months, especially if inflation trends and economic conditions require a shift."
