The Fed halts Bitcoin’s run; what comes next?

For crypto investors, sentiment is louder than fundamentals. Bitcoin ($BTC) and the rest of the crypto market have fallen in the past week. With uncertainty surrounding the markets — where does Bitcoin go from here?

The Fed puts a brake on the market run

The Fed is planning to act fast and aggressively to reduce inflation. Yesterday, the Fed released their minutes — notes from the March Fed meeting:

• Signaled several potential 0.50% interest rate increases in the coming meetings.
• Reducing its $9T balance sheet by $95B per month — likely starting in May.

Since the start of COVID, the Fed spent billions buying up bonds and mortgage-backed securities to support markets. Now it’s time to offload some of those assets.

The US 10-year yield — the interest rate on government loans — has risen from 1.7% at the start of March to 2.6% today.

• Rising yields could hurt risky assets, including tech stocks and crypto — per Kaiko Research (via Coindesk).
• Bitcoin could move upwards when yields stop rising, but “we are not there yet” — per Jeroen Blokland, Founder of True Insights.

Long-term BTC investors keep on HODling

Inflation, interest rates and geopolitical events are still driving markets — with US stocks and crypto moving in similar directions.

In March, the correlation between Bitcoin and the S&P 500 surpassed its highest level since October 2020.

The amount of BTC held in “accumulation addresses” — accounts with purchases but don’t sell — has risen to record highs in the past four months. Two notable buyers:

• MicroStrategy (NASDAQ:MSTR)— the software firm purchased $190M BTC between February 15 and April 4 — now holding $6B in BTC.
• Luna Foundation Guard — which oversees the blockchain Terra ($LUNA) and stablecoin $UST — holds $1.6B in BTC and is committed to buying up to $10B.

But the amount purchased by LFG has slowed and could make Bitcoin “vulnerable to adverse macro developments.” (CoinDesk)

Investors: Why isn’t the market moving higher?

Two reasons:

• Uncertainty prevents BTC from moving higher as speculators and macro investors stick to the sidelines — per Genesis Head of Insights Noelle Acheson (LN).
• Lack of new money coming into the markets is a barrier to new market highs — per macroeconomist and tech investor Tascha Che (Tascha Labs).

Crypto investors are still building, long-term investors are still HODling, and crypto developments are coming on the horizon — but so far, uncertainty is driving markets.

Per Acheson, in crypto, “when things start to change, they can change quickly” — but the more considerable uncertainty is when that change will come.