The interest rate cut measures are "halted", Standard Chartered's "heartbreaking" prediction: BTC may fall to $50,000

The Federal Reserve kept interest rates unchanged on Wednesday, in line with market expectations. Although the U.S. central bank said it still prefers to eventually reduce borrowing costs, it warned of recent disappointing inflation data, suggesting that interest rates may remain stable for some time, as the Fed's progress in achieving its 2% inflation target has stalled, reducing the likelihood of a near-term rate cut, and the pace of rate cuts has stalled in the short term.

Fed Chairman Jerome Powell said at a news conference that it would take longer than expected for policymakers to gain the "greater confidence" needed to cut interest rates. "Inflation remains too high to warrant further progress in reducing its impact, and the path forward is uncertain," he said.

Bitcoin and the crypto market are once again on a roller coaster ride. BTC once fell 7% in early trading on Wednesday, from $60,775 to an intraday low of $56,500, and consolidated before the announcement of the interest rate decision. After Powell's speech, BTC rebounded to above $58,000 in the short term, and fell again. As of the time of writing, the trading price is $57,700, a 24-hour drop of 4%.

Altcoin markets were trading higher late in the session, with about a quarter of the top 200 tokens by market cap in the red, while the rest were up slightly. ZetaChain (ZETA) led gains for a second day, up 14.9%, followed by Optimism (OP) up 11.3%, and Polkadot (DOT) up 10.6%. Radix (XRD) was the biggest loser, down 9.7%, while Arweave (AR) fell 9.3%, and Golem (GLM) fell 7.1%.

The overall cryptocurrency market cap is currently $2.15 trillion, with Bitcoin’s dominance rate at 52.3%.

Standard Chartered Bank: BTC may fall to $50,000

Investment bank Standard Chartered said in emailed comments on Wednesday that Bitcoin has fallen below the $60,000 technical level, opening the way for a further drop to the $50,000 to $52,000 range.

The bank noted that U.S. spot Bitcoin exchange-traded funds (ETFs) have now seen outflows for five consecutive days, and BTC is trading below the average ETF purchase price of about $58,000. Analyst Geoff Kendrick wrote: "This means that more than half of the spot ETF positions are in trouble, so the liquidation risk of some of these positions must also be considered."

The bank said the price declines appear to be driven by a combination of crypto-specific factors and macro influences, with risk assets such as cryptocurrencies that rely on liquidity facing increasing macro headwinds. The report noted that broader liquidity measures in the U.S. have deteriorated sharply since mid-April.

However, Standard Chartered suggests that investors could buy Bitcoin on dips if it falls to the $50,000 to $52,000 range, or if the U.S. Consumer Price Index (a measure of inflation) performs “friendly.”

Macroeconomic pressures limit upside

Analysts at Secure Digital Markets said: "As macroeconomic pressures persist, bearish momentum has intensified, pushing Bitcoin below the critical support level of $60,000. Bitcoin has recently fallen to $56,700, falling below the $57,000 mark for the first time since February 28 and recording its first monthly decline since August."

They noted: “This 16% drop is the largest since the FTX crash in November 2022. Immediate support now hovers between $50,000 and $53,000. The crypto market is showing signs of fatigue due to the expected smaller rate cuts and continued withdrawals from the US BTC ETF.”

With the Federal Reserve holding rates steady, "expectations of a long path to rate cuts are further unsettling markets," analysts said.

Coupled with the weakening liquidity caused by the sharp outflow of funds from the spot BTC ETF, the spot BTC ETF saw net withdrawals for the fifth consecutive week, amounting to US$635 million.

They added: “Altcoins, especially those categories that have outperformed recently such as AI tokens and meme coins, have suffered. Equity markets have also been hammered, with the S&P 500 and Nasdaq both down more than 4% in April, while the Dow Jones fell 5%, marking its worst monthly performance since September 2022.”

“Futures market betting probabilities currently imply a roughly 50% chance of a rate cut by September, with a quarter percentage point cut expected by the end of 2024,” they concluded.

Experienced crypto traders view this correction as a routine adjustment in a bull cycle.

“While it may be painful to see Bitcoin price retrace and/or move sideways… this is exactly what is needed for the cycle to resynchronize with historical price norms and traditional halving cycles, and the longer this continues, the better,” said market analyst Rekt Capital.

RealVison founder Raoul Pal noted that this was the fourth 20% pullback in the past 12 months and called it "a very common occurrence."

The multi-day sell-off has taken its toll on crypto market sentiment, with Alternative data showing that overall crypto market sentiment is now “neutral” at press time after being in a “greedy” or “extremely greedy” state for the past month.