03.05.202211:32 Forex-elemzések és áttekintések: Rising volatility and trading volumes: What to expect from Bitcoin after the Fed meeting?

Over the last month, Bitcoin has reached several milestones. The first one, which is positive, is that the volatility level of the asset has reached an all-time low. For a high-risk instrument, this is an important signal that increases its attractiveness for institutional traders. The second indicator is negative and represents a 30% decrease in Bitcoin trading volumes. These facts are interrelated and stem from the influence of geopolitical events and the subsequent reaction of state regulatory authorities to them.

The decline in trading volumes was due to the Federal Reserve's policy of tightening liquidity and winding down the quantitative stimulus program. As a result, the volume of liquidity in the market decreased, the cryptocurrency market began to maintain a downtrend, and investors moved their capital to more promising sectors. All of this led to a gradual decline in the price without buyers attempting to protect important boundaries and a lack of upward momentum, a gradual decline, and a decrease of interest in the asset from new investors.

As a result, Bitcoin got rid of retail and short-term speculative traders, which accounted for about 18% of the total number of investors in mid-March. The volatility of the asset began to fall and specific trends began to show up more clearly in the cryptocurrency's charts. On the one hand, this is quite good, as lower volatility was a major necessity for big investors to enter the market. However, it is ironic that this happened when the asset was not needed as a means of payment.

Another important reason for the decrease in volatility was the active accumulation phase. According to CryptoQuant, the volume of BTCs on exchanges has reached its lowest level since 2018. This prevents additional pressure on the coin's quotes and also reduces the influence of short-term traders on Bitcoin.

The current state of the cryptocurrency has its pros and cons, but very soon it will not be so important. On May 4, the Fed's two-day meeting starts, and there is every reason to believe that the key rate will be raised by 50 basis points at once. The market is already preparing for this, as evidenced by the accumulation of stablecoin volumes and the lack of a fight for important support areas. Most likely, the market is preparing to catch the major cryptocurrency between $32,000 and $35,000. During the week after the end of the meeting, we should expect a sharp drawdown of the stock and cryptocurrency markets.

We should subsequently expect a series of similar decisions from European central banks. All this may drag Bitcoin to the range of $32,000-$35,000, where investors will need massive amounts of stablecoins. However, even if the situation unfolds like this, there is a possibility of further price declines. This is due to general market sentiment, which will intensify many times after the price drops to $32,000-$35,000. Notably, more than 80% of BTC was in profit when the price was around $40,000. The main buying area was the range of $35,000-$40,000, so there is every reason to believe that in the first weeks the growth of trading volumes and volatility will negatively affect the BTC/USD pair.

As of May 3, Bitcoin forms the Bullish Wedge pattern on the daily chart. It is likely that the rate hike has been already priced into the asset and the market will meet the results of the meeting calmly. In this case, there will be a bullish breakout of the range toward $40,000. However, investors may not expect the rate to rise by 50 points at once and this scenario is more likely to occur. In this case, the asset may fall into the area of $32,000-$35,000. Technical indicators remain sideways and MACD is moving below zero. All this points to the lack of large volumes from buyers, and most likely, the price will continue its downward movement.