“The Fed’s quantitative tightening announcement on Wednesday will determine the fate of the market,” says analyst Alex Krueger.

Bitcoin (BTC) starts a new week with a lot to make up for after its worst performance in April.

The monthly close left the BTC/USD pair firmly within its set 2022 trading range, with fears already that the next level it hits will be $30,000 or even lower.

Sentiment has improved as May begins, and while crypto remains generally tied to macro factors, on-chain data is pleasing rather than scaring off analysts.

However, given the US economic policy decision due on May 4, the next few days may be a matter of unthinking reactions as markets try to align with central bank policy.

In this article, we look at these and other factors that will determine Bitcoin price action this week.

Fed Back in the Spotlight

The macroeconomic markets, as usual, are on edge this week as a new meeting of the United States Federal Reserve approaches.

The focus is therefore on the meeting of the Federal Open Markets Committee (FOMC) to take place on May 3 and 4.

“First came the Fed. Then the Netflix apocalypse. Then the Russian invasion. Then sanctions. Then the Fed and the biggest Treasury dump in history. This week was earnings. Next week it was the Fed again.” macro analyst Alex Krueger summed up the weekend:

Krueger referred to a policy known as quantitative tightening (QT), the counterpart to quantitative easing, or QE, which describes the pace of withdrawal of economic support from the Fed in an attempt to shrink its $9 trillion balance sheet.

Is it Time for the Price of Bitcoin to Return to the $28,000 Level?

“The BTC chart is heavy right now, and a drop below $35,000 could cause a race to the exit… However, I do not trust falling patterns in this range. We saw short squeezes and breakout traps from the all-time highs over the past year,” popular trader Chris Dunn tweeted on May 1: “It’s risky to anticipate, it’s better to react… I’d love a $26,000 washout.”

Dunn is far from alone in calling for a capitulation event that takes the market to $30,000 or below. “As far as talking about capitulation, I think it would require Bitcoin to go below $30,000” analyst Matthew Hyland said.

Hyland explained that low-volume markets are likely to see larger price swings, and a significant BTC price drop may be necessary to rekindle engagement amid a general lack of engagement at current levels.

US Dollar Strength Maintains Pressure

April may be over, but the fallout from the US Dollar Index (DXY) is still evident.

Gains made in a single day on April 29 are history, and on May 2, DXY attempts to continue a rally that has seen the dollar’s strength reach its highest since 2002.

“The development of the dollar is highly dependent on the Fed’s course of action. Rising inflation and a possible 50 basis point rate hike in early May could strengthen DXY,” explained the latest Uncharted bulletin from on-chain analytics firm Glassnode.

Trader: Illiquid Supply Outweighs Importance of Falling Prices

According to Glassnode’s Illiquid Supply Change indicator, the past few weeks have seen large increases in the overall segment of BTC supply, which is no longer available for purchase.

The result is that the Illiquid Supply Change is reaching levels not seen since late 2020 when the BTC/USD pair began showing signs of a “supply shock” as market participants amassed what was a class of assets that was already receiving numerous purchases.

Cointelegraph contributor van de Poppe argued that the indicator “says a lot” and might even remove some of the fear around a drop to $30,000.

Crypto Sentiment “Crosses” the Macro

In what could be a positive aspect under the current circumstances, sentiment in the crypto space is already pointing higher this week, even as mainstream market sentiment remains jittery.

The Cryptocurrency Greed Fear Index, having touched two-week lows of 20/100 last week, has moved out of its “extreme fear” zone.

By Audy Castaneda


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