As the Federal Reserve (Fed) prepares to announce its decision interest rates, Material Indicators, a research and analysis company in the cryptocurrency market, keeps a close eye on Bitcoin (BTC) liquidity movements. FireCharts, a popular charting platform, has been tracking liquidity movements in the BTC/USDT Binance order book. Their observations have led them to believe that the recent decline in Bitcoin’s price may continue.
Liquidity refers to the amount of Bitcoin available for trading at a given price level. When there is a large amount of liquidity at a certain price level, traders can easily buy or sell Bitcoin at that price without significantly affecting the market. However, low liquidity at a certain price level can lead to volatility spikes as traders rush to buy or sell the asset.
Will Bitcoin face a new dip
FireCharts of material indicators analysis shows that liquidity in the Bitcoin order book is ahead of the Federal Reserve’s decision, indicating that traders are preparing for potential volatility in the market. This could lead to further price declines as liquidity declines to the upside.
Added to the above, according to According to Kaiko, a leading provider of cryptocurrency market data, liquidity in Bitcoin and Ethereum continues to deteriorate, with market depths for both cryptocurrencies approaching year-long lows, which could have significant implications for bulls as low liquidity can lead to increased volatility and price instability.
At the time of writing, the price of Bitcoin is at $28,300, representing a 1.4% drop in the past 24 hours. Despite recent news of more bank failures briefly pushing the price above $29,000, Bitcoin has remained within its established trading range of $27,800 to $28,600. The attempt to cross the $29,000 mark was unsuccessful and the price has since bounced back to its current level.
The market continues to move as investors monitor ongoing price movements, waiting for a clear direction after the Federal Open Market Committee meeting. But will this lead to more retracement, or will the market react positively to the news?
BTC braces for potential impact of Federal Reserve interest rate hike
The Federal Reserve’s most recent measures on employment and wages suggest more rate hikes are on the horizon. This comes after the main labor cost metric for the first quarter came in higher than expected. One of the Fed’s favorite inflation gauges, the Personal Consumption Expenditure (PCE) index, remains at a sustained high.
Continue according to the last report by Bitfinex, a leading cryptocurrency exchange, labor cost statistics for the first quarter came out hotter than expected, indicating that wages are rising faster than expected. This could lead to higher inflation, as companies can pass on higher labor costs to consumers through higher prices.
This suggests that the Federal Reserve may need to raise interest rates to control inflation and maintain price stability. The Fed has already signaled that it may raise rates in May, and these latest employment and wage measures reinforce that decision.
The implications of a rate hike are significant for financial markets, including the cryptocurrency market. A rate hike could increase volatility and uncertainty as investors adjust their expectations for future economic growth and earnings. However, it could also lead to a stronger dollar and increased demand for safe haven assets like gold and Bitcoin.
Featured image from iStock, chart from TradingView.com
