June US Fed, Bank of Japan interest rate surprise bomb?...Bitcoin, $60,000 floor collapse warning

▲ Bitcoin (BTC), cryptocurrency decline, US, Japan/AI-generated image

Investors are growing increasingly nervous as warnings emerge that the Bitcoin (BTC) market is once again facing the sell-off cycle that has repeatedly occurred after temporary rebounds during past bear markets.

Cryptocurrency analyst Benjamin Cowen, in a video uploaded to his YouTube channel on May 25 (local time), diagnosed the recent Bitcoin rebound as a typical bear market rally rather than the beginning of a full-fledged bull market. Cowen stated, "The price correction that has occurred for two consecutive weeks recently is a precursor to further declines," adding, "There is a high possibility of a strong low sweep breaking the $60,000 support level in the short term." He believes that as Bitcoin has been pushed back from technical resistance lines compared to the New York stock market, including the S&P 500, it could continue to underperform stock market returns for several months to come.

The first rationale presented by Cowen is the seasonality and downward cycle that has recurred every midterm election year. In the midterm election years of 2014, 2018, and 2022, strong sell-offs occurred in June after corrections in February and April. It typically took 20 to 21 weeks to form a final low after the previous high in a bear market, and Bitcoin is currently in its 16th week of a downward cycle. The remaining approximately four weeks of decline coincide with late June, when major macroeconomic financial policy meetings are concentrated.

The macroeconomic environment is also a burden on Bitcoin. The cryptocurrency market tends to react more sensitively to global liquidity and central bank policy stances than the stock market. As the U.S. bond market begins to price in the possibility of interest rate hikes by the Federal Reserve, investor sentiment for risk assets is rapidly contracting. Analysis suggests that if instability in the Middle East leads to rising oil prices, inflationary pressures could intensify again, and fears of additional interest rate hikes could put stronger pressure on the market.

The mid-June Federal Open Market Committee meeting and the Bank of Japan's interest rate decision schedule were also cited as key market variables. Cowen referred to past precedents where large-scale sell-offs and capitulation sales occurred in the Bitcoin market after the Bank of Japan's surprise interest rate hikes, pointing out that if monetary tightening events coincide in late June, the risk of cascading liquidations in the virtual asset market could increase. The recent decoupling, where Bitcoin alone has performed poorly while the New York stock market shows an all-time high trend, was also presented as a warning sign.

Cowen assessed the New York stock market's strength as a limited rally driven by expectations for AI-related big tech earnings. He explained that liquidity to push up the virtual asset market is still insufficient. Analysis of the Bitcoin vs. S&P 500 relative value chart also showed that the 20-week simple moving average and 21-week exponential moving average acted as strong sell walls every midterm election year, and this time too, a downward trend appeared after encountering resistance in that range. In the current structure, which has not recovered long-term trend lines, the liquidation of individual investors' leverage and the risk of further corrections remain major burdens on the market.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*