Meme fanaticism dissipates, BTC's upward movement is blocked

Original text: "The Meme sector has begun to "flame off", and liquidity is still the biggest upward obstacle for Bitcoin"

Author: BitpushNews Mary Liu

Bitweet terminal data shows that in the past 24 hours, Bitcoin (BTC) once plummeted to a two-month low of $26,000, a seven-day drop of more than 10%, reaching its lowest level since March 17. Altcoins were not spared either, with Aptos (APT) down 20%, Filecoin (FIL) and Arbitrum (ARB) down around 17% each. At press time, Bitcoin was trading on a slight bounce around $26,800, but had yet to breach $27,000.

The Meme section starts to "flame off"

The recent hot memecoin sector has also reversed sharply, especially Pepecoin (PEPE), which has fallen by more than 60% in the past week of trading. The new token, based on the sad frog meme, debuted in April and quickly rose to more than $1 billion in market capitalization, which has since shrunk to about $560 million. Other plummeting memecoins include Dogecoin (DOGE) and Shiba Inucoin (SHIB), both down around 11% over the past seven days.

Youwei Yang, chief economist at listed bitcoin mining firm BTCM, told Coindesk: “The meme coin hype is usually exciting, but then there is often a market crash, similar to what we saw with DOGE and SHIB two years ago, The correction in memecoins this week is largely due to cooling of FOMO (fear of missing out) sentiment towards these new memecoins.”

Market Liquidity and Regulatory Pressures Hold Bitcoin Back

Binance, the world's largest cryptocurrency exchange, has announced that it will withdraw from the Canadian market, citing regulatory reasons. After the news was released, the market value of Bitcoin fell sharply, from 509 billion US dollars to about 501 billion US dollars, and then quickly rebounded to more than 510 billion US dollars.

Binance's problems with Canada go back at least a few years. In 2021, the company ceased operations in Ontario due to a regulatory crackdown. Both Paxos and dYdX left Canada this year after the Canadian Securities Authority issued new regulations in February.

Kevin Peng, an analyst at The Block Research, commented: “This seems to be a natural reaction to the ongoing regulatory uncertainty at Binance. The market has been volatile over the past week as rumors of Binance’s troubles continued to emerge.”

Despite a positive U.S. CPI report and market expectations largely tilted towards favorable conditions such as no interest rate hikes from the Fed, the price of Bitcoin fell, possibly due to illiquidity.

Kaiko analyst Dessislava Aubert said in his report that in the first quarter of 2023, after the string of U.S. banking failures and the end of the zero-fee promotion, Binance’s trading volume and liquidity have been steadily declining, and the result is increased volatility. , which caused the price of Bitcoin to fall further.

Aubert wrote: “We’ve seen this with BTC’s recent sudden price moves, but without a clear catalyst, the volatility is unlikely to disappear, especially with some of the larger market makers (Jane Street and Jump Crypto) After revealing that they are reducing their crypto trading operations in the US.”

Regulatory pressure is also mounting in the US, where bitcoin miner Marathon Digital Holdings recently received a subpoena from the US Securities and Exchange Commission. This regulatory uncertainty adds to the complexity of the market, Oanda analyst Ed Moya said in his tweet, Bitcoin remains under further downward pressure pending regulatory clarity.

Fidelity Global Macro Director: Bitcoin is "overheated"

Jurrien Timmer, global director of macro at Fidelity, commented on Bitcoin's movements, comparing its current market dynamics to that of gold. Timmer said that Bitcoin is now advancing at the same pace as gold, but he warned that BTC may have gotten a bit ahead of itself, suggesting that it may be overvalued towards the $30,000 mark.

In his tweet, Timmer highlighted an 88% negative correlation between Bitcoin and two-year inflation-proof bond real yields and a 63% negative correlation with PCE-derived real rates since 2018. This correlation suggests that Bitcoin is in a similar position to gold in terms of its response to real interest rate drivers. In layman’s terms, what Timmer is implying is that the price of Bitcoin tends to move in opposite directions of these two economic indicators. If the returns on certain government bonds rise, or if inflation rises, we can expect the price of Bitcoin to generally fall, and vice versa.

Timmer also pointed to a key difference between the gold and bitcoin regression models. Gold follows a linear regression while Bitcoin grows exponentially. Timmer interpreted this as a sign of Bitcoin as a “powerful inflation hedge.” This powerful hedging potential, combined with its growing popularity among investors, makes Bitcoin an extremely attractive asset. But his warning of potential overvaluation of bitcoin, which has fallen to its lowest point since March 17 and is down more than 12 percent since May 6, tied with Nasdaq, underscored the need for caution among investors. Decoupling of traditional risk assets such as grams.

CEC Capital cryptocurrency consultant Laurent Kssis analyzed: "Bitcoin may fall below $26,000 over the weekend. Holding may be a short-term behavior."