Bitcoin Falls After FOMC but bulls can still buy

Takeaways from the conference:

• Buy BTC to support Bitcoin’s upward momentum.

• Even if the price drops another 5%, there is less risk of a cascading loss if Bitcoin bulls have low leverage.

• Inflation concerns are a negative factor for fixed-income investments, which could lead to an eventual shift from gold to Bitcoin.

BitcoinBTC() suffered a 7% drop after flirting on Tuesday with $76,000. After a drop in US stocks, oil prices soared after Israel attacked Iran’s biggest gas processing plant and US producer price index rose above expectations.

Despite the recent losses, there is no indication that Bitcoin’s bullish momentum has faded, given how the S&P 500 and US Treasuries have behaved amid worsening macroeconomic conditions. Bitcoin bulls avoided over-leveraging, which reduced the chances of cascading liquidity.

The S&P 500 index traded merely 4% below its all-time high on Wednesday despite recent weak US job market data and continued pressure from the ongoing war in Iran. US jobless claims were relatively unchanged at 1.85 millions in the last week of March. The US reported on Wednesday that wholesale prices in the US increased 3.4% from the previous year in February, which is the biggest gain for 12 months.

Oil prices rose above $98 and investors were more confident that the US Federal Reserve would not be able ease its monetary policy until 2026. CME FedWatch Tool The implied odds from futures market showed Wednesday that the odds for an interest rate to remain stable by September had dropped from 89% to 42%, a drop of one-month.

Bitcoin is under pressure from investors who are more risk-averse due to the prolonged threat of war.

Investors avoided risk because of sticky inflation and the threat of prolonged conflict. There is little reason to think that traders are anticipating a crash. At least, judging from the way interest rates have been priced in relation to inflation expectations.

On Wednesday, the 2-year Treasury yield was 3.71%, and the Cleveland FED’s 2-year inflation expectations were 2.27%. This resulted in an adjusted return of 1.44%. When there is a lot of fear in the air, the higher demand for bonds can result in returns that are near zero or even negative. A lack of confidence in US financial policy may push this indicator up to 2,5%.

There is low risk that cascading liquidity will occur if Bitcoin falls another 5%. The spot market has supported recent bullish momentum, particularly through US-listed companies. spot Bitcoin ETF accumulation MSTR’s is a shorthand for the Management Strategy Team aggressive buying activity.

CoinGlass believes that 450,000 leveraged Bitcoin futures, worth $4.5 billion in total open interest would have to be terminated. That’s less than 1 percent of the $49.6 billion current aggregate. Bitcoin perpetual forwards funding confirms the overconfidence of bears as they have increased their demand for leverage.

Related: 74% of institutions expect crypto prices to rise in 12 months–Survey

Negative funding rates mean that shorts pay to maintain their open positions. In addition, it was important to note that the indicator remained below the neutral 6-12% range, even when Bitcoin prices surged over $76,000. It reinforced the idea of the spot market sustaining the momentum and not derivative markets.

The gold price dropped from $4,900 to $4,900 today, following four weeks of holding above $4,800. An eventual rotation out of gold A sustained Bitcoin rally could occur, particularly as concerns about inflation negatively affect the returns expected for fixed income assets. There is no indication, overall, that Bitcoin’s bullish momentum will fade.