- Following a strong rally in Q1, Bitcoin is entering a new consolidation period.
- The deflationary narrative around Ethereum continues despite ETH’s price falling below $2,000.
- Ethereum has to pass the previous support turned resistance of $2150 For the uptrend to recover momentum, where it pulled off a false breakout and failed.
- Binance was forced to temporarily halt Bitcoin withdrawals after a record-breaking surge in unconfirmed transactions.
- Binance has to raise the fees in order to fix the problem, and the crypto community won’t like that. The average withdrawal fee for Binance will increase from $5 to $27
- The market is likely to be impacted by the US CPI data that will be released on May 10.
This week’s first day of trading saw Bitcoin (BTC) drop under $27,500. It was down more than 5% from the previous week and was trading at roughly $27,500. Major retail players were reflecting on the spike in interest in the PEPE meme currency and the congestion problems at Binance that compelled the big exchange to briefly halt bitcoin withdrawals over the weekend. In a similar manner to BTC, Ethereum (ETH) lost some of its recent gains and dropped below the $1,900 mark. The price of the ETH token, which had retraced 7% over the weekend, was around $1,830.
The annualized inflation rate for ETH, or net issuance, just fell to -2.5%, strengthening the deflationary narrative around ETH after the Ethereum Shapella upgrade. Over the last seven days, more than 62K ETH, valued at about $110+ million, have been burned. Markets responded to prospective sell-offs from the ETH Foundation and Vitalik Buterin, but long-term investors remain firm.
The sell-off over the past week shows that the U.S. stock market is now responsive to bad news about smaller banks. During the week, the price of gold got very close to its all-time high. Since a few days ago, the S&P 500 Index has been moving back and forth within a narrow range. This means that the markets are looking for the trigger to start moving in the next direction. The US non-farm payroll numbers for April, which were announced on May 5, were stronger than anticipated and revealed a robust labor market. The Consumer Price Index (CPI) data, which was issued on April 12, revealed that inflation had once again moderated. Although the market’s worries about the US Dollar Index’s vulnerability grew, we think the Fed’s tightening monetary cycle may be nearing its conclusion given that the economy is operating at a decent level and inflationary pressures have subsided. The market is likely to be impacted by the US CPI data that will be released on May 10
Bitcoin’s network congestion:
On Sunday, cryptocurrency exchange Binance momentarily halted Bitcoin withdrawals on its platform, preventing the biggest token by market value from leaving the top trading venue by volume.Binance said that their decision was based on network congestion difficulties and that it was “currently working on a fix” to resume withdrawals “as soon as possible.”
Meanwhile, over 455,000 transactions are still awaiting confirmation in Bitcoin’s mempool. While network congestion may be ascribed to an increase in Ordinals inscriptions, this has raised worries about a possible Denial of Service (DoS) assault on the network.
Binance, for example, was forced to suspend BTC withdrawals due to “the large volume of pending transactions.” Despite the volatility and fear, Bitcoin investors tend to remain optimistic. The number of addresses transferring BTC to exchanges has dropped to a two-year low of over 3,700, showing that investors are ready to keep the commodity in expectation of a fresh rise.
Bitcoin Price Analysis:
On May 6, Bitcoin fell quickly from the resistance range of 30,000-$30,200, signalling that the bears are unwilling to allow the bulls through. A slight plus is that the bulls have been aggressively buying falls and attempting to defend the $27,812 resistance turned-support area. If the price falls below the $27,812 support level, it indicates that bears are attempting to take control. The BTC/USDT pair might decline to $26,500, then to $24,719. For the time being, we’re likely to approach the $26,500 level sooner or later.
A break and close over $30,200, on the other hand, indicates that the bulls have absorbed the supply. This might spark a surge to $32,500, where the bears are likely to stage another strong defense. The market is likely to be impacted by the US CPI data that will be released on May 10.
Concluding Thoughts:
Global capital flows into dollar-denominated assets have also decreased in the first quarter of 2023. Most crucially, the conflict between Russia and Ukraine has shown to participants in the US dollar system that the US has the ability to freeze its dollar reserves. The global financial sector will further decouple from the US currency and become more polarised. This tendency may have the effect of helping Bitcoin establish itself as a major player in the world of finance. The success of US equities and treasuries also supported the favourable macroeconomic circumstances that support this trend. The market’s performance should be significantly impacted by the current Q1 earnings season and significant economic data releases, particularly the information on corporate profits and economic growth. The Fed’s shift towards dovishness will help the market rebound. One possible result of this tendency is that Bitcoin will firmly establish its place in the world’s financial system.
In terms of macroeconomic events, the week will be highlighted by the release of the April Consumer Price Index (CPI) for the United States. The CPI, which is scheduled on May 10, will be extensively watched for signs that inflation is continuing to decline, perhaps allowing policymakers to soften economic policy.Despite a slight decrease below market expectations, Bitcoin hit new ten-month highs in April.
However, the CPI is just one of three significant data releases coming this week in the United States, the others being unemployment claims and the Producer Price Index. This week, four Federal Reserve speakers will take the stage, and major corporations will announce first-quarter results.
