3 Indicators Suggest That The Bitcoin Price Is Approaching the Bottom

The outcome of the Federal Reserve minutes on May 1st, the resilience of Bitcoin miners, and the rising demand for stablecoins in China might indicate that BTC has reached its bottom.

Source: supergirisnow.com

Between April 30 and May 1, Bitcoin experienced a crash, with its price dropping by 11.5% to $56,522. This decline led to $172 million in liquidations of leveraged long positions, a relatively modest figure considering that Bitcoin futures open interest stood at $28.9 billion prior to the price drop. Thus, it would be over simplistic to presume that bulls were caught off guard.

The Release of the Fed Minutes Should Reduce Uncertainty

Some analysts suggest that investors are adopting a wait-and-see approach until Jerome Powell, Chair of the United States Federal Reserve, concludes his speech following the two-day monetary council meeting on May 1. While it's widely anticipated that the Fed will maintain interest rates at 5.25%, there's significant doubt regarding the U.S. Treasury Department's capacity to finance the government's budget.

On April 30, the yield on the U.S. Treasury two-year note surged to its highest level in five months, hitting 5.06%, as investors sought higher returns to mitigate increased risk following the announcement of a $1.07 trillion deficit for the first half of 2024. Since the Fed's rate hikes throughout 2023, interest expenses on the deficit have soared by 23% in the first half of 2024 and are expected to continue rising as long as rates remain elevated.

Bitcoin isn't the sole asset facing declines. Deteriorating macroeconomic conditions are making investors more risk-averse. The Russell 2000 Index, which monitors mid- and small-cap U.S.-listed companies, plummeted by 8.2% over the last 30 days, erasing gains from the prior two months. Similarly, WTI oil prices have slumped by 8.3% since April 5, when they peaked at $87.91, marking a five-month high.

Bitcoin Miners Capitulating and a Notable Influx of Cryptocurrencies in China

Following the April 20 halving, Bitcoin miners are experiencing significant pressure, as their rewards have been halved to 3.125 BTC per block. According to Ki Young Ju, CEO of CryptoQuant, data on miners' outflows to exchanges currently shows no signs of capitulation "for now." However, Young Ju warns that if the downward trend in Bitcoin's price persists over several weeks, major miners could face the need to liquidate a substantial amount of Bitcoin. Another indication that Bitcoin's downturn might be nearing its conclusion is the resilience of miners. Despite a 57% decline in the Hashrate Index, reported by Luxor Technology, miners are showing reluctance to sell. This index evaluates the daily expected return of one terahash of hashing power, considering network difficulty, Bitcoin's price, and transaction fees.

On May 1, the premium for USDC in China rose to 2.7%, indicating strong demand for converting the Chinese yuan into USDC. This consistent interest reflects a positive outlook toward cryptocurrencies in China, contributing to a more optimistic view of Bitcoin, despite its recent 20% price drop over three weeks. However, the U.S. market tells a different story. Despite potential boosts in market sentiment from the Federal Reserve's recent notes and alleviated fears regarding miner capitulation, U.S.-listed spot exchange-traded funds experienced net outflows of $635 million over the last five trading days.

These trends underscore the importance of investment flows in influencing Bitcoin's price movements, with uncertainty remaining over whether the $56,500 support level will be sustained.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.