Markets

Is bitcoin rally dead or alive?

On May 3 and May 4, 2022, the FOMC meeting decision to raise interest rates sent ripples through the cryptocurrency market. This led many to believe that Bitcoin’s rally will not continue to its all-time highs in November 2021.

A year later, it is important to examine the ongoing relationship between interest rates, stocks, and the cryptocurrency markets.

The evolution of the crypto landscape

Despite the initial shock, Bitcoin’s rally has begun, and the price has managed to climb more than 70% since the beginning of the year. However, the past 30 days have seen assets diverge from one another, to chart unique paths.

Top 10 Cryptocurrencies by Market Cap. source: TradingView

this Offers opportunities For those closely involved with on-chain and social statistics. It helps them make informed decisions before pumping one coin and dumping another.

Bitcoin and Stocks: A Growing Correlation

The cryptocurrency market has shown an increasing correlation with the US stock market. This trend may be affected by the FOMC’s continued rate hikes over the past year. Around the time of the Fed rate decision, the relationship between these two sectors is strengthening.

Higher interest rates increase borrowing costs and reduce consumer and investor spending. This can negatively affect the stock markets, thus reducing the demand for cryptocurrencies.

Bitcoin Social Volume vs Fed
Bitcoin Social Volume. source: Emotion

On the other hand, lower interest rates can increase spending, stimulate economic growth, and positively affect both stocks and cryptocurrencies.

Market analysts closely monitor the Federal Reserve’s decisions and their impact on the broader economy and financial markets, including the cryptocurrency sector.

The sensitivity of the cryptocurrency community to interest rate decisions

The crypto community is highly tuned in to the upcoming FOMC decisions and will likely react sensitively to the results. The increasing focus on money-related topics such as banking, taxes, money, fees, and stables indicates that society is watching fiscal policy closely.

Social trends for Fed-dominated cryptocurrencies
social trends. source: Emotion

One positive consequence of the growing concern that “we may be ahead” is that Bitcoin is becoming a more important focal point.

Bitcoin sharks and whales, who hold between 100 and 10,000 BTC, are back where they started when the sell-off began in late March.

Bitcoin whales
Bitcoin whales. source: Emotion

Meanwhile, the accumulation of stablecoins, particularly USDT (red line) and USDC (blue line), has increased since the beginning of June.

Stablecoin accumulation
Stablecoin accumulation. source: Emotion

This market behavior indicates that more organic money will return to the cryptocurrency in less than a year until the 2024 Bitcoin halving.

Bitcoin Rally is having trouble with slowing network activity

Despite the positive signs, there are concerns about the lack of unique addresses interacting on the BTC network.

Over the past two weeks, there has been a strange drop in daily active addresses. The utility must remain stable to confirm the possibility of a breakout along with other bullish signals.

Daily active headlines
Daily active bitcoin addresses. source: Emotion

The 30-day MVRV (in red) is back below 0%, which means that the average trader in the past 30 days is down again. When this happens, there is less risk than the average being in cryptocurrencies.

BTC MVRV
Bitcoin MVRV. source: Emotion

However, the long-term 365-day MVRV (in yellow) remains stable at +25%.

All eyes are on the Federal Reserve

The relationship between the Fed’s interest rate decisions, the stock market, and the cryptocurrency market continues to evolve. As the FOMC continues to impact the broader economy, the cryptocurrency community remains sensitive to changes in fiscal policy.

Growing concerns about unique addresses and network activity could negatively impact Bitcoin’s rally. However, as the 2024 Bitcoin halving approaches, the crypto market’s response to interest rate decisions will remain crucial.

Disclaimer

In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.

Leave a Reply

Your email address will not be published. Required fields are marked *