Bitcoin faces a critical 36 hours! The Federal Reserve interest rate decision and inflation data may exacerbate volatility

According to the VESYNC financial APP, before the Federal Reserve announces its interest rate decision and the release of key inflation data in the United States, the global market is on edge. Bitcoin investors have reason to be wary of potential increased volatility. Data shows that the 30-day correlation between Bitcoin and the 10-year U.S. Treasury yield is -53, one of the most negative readings on record since 2010, indicating an unusually high level of negative correlation between Bitcoin and benchmark bond yields.

The U.S. May CPI data will be released at 20:30 Beijing time on Wednesday. The Federal Reserve will announce its interest rate decision and update rate forecasts at 02:00 Beijing time on Thursday. The market currently expects the year-on-year increase in U.S. May CPI to be 3.4%, unchanged from the previous value; the year-on-year increase in core CPI in May is expected to be 3.5%, slightly lower than the previous 3.6%. At the same time, according to the median estimate of the survey, 41% of economists expect the Fed to signal two rate cuts in the highly anticipated "dot plot," while an equal number of economists expect the Fed's forecast to show only one rate cut or no rate cut at all.

The bond market may be impacted by inflation data and the outlook for Fed interest rates. Related research suggests that Bitcoin may face selling pressure.

Bitcoin prices fluctuated on Tuesday, falling by 3.2% to a one-week low. Driven by the inflow of funds triggered by the approval of the spot Bitcoin ETF, Bitcoin reached a record high of $73,798 in mid-March. However, over the past 3 months, Bitcoin prices have struggled to reach new highs. Tony Sycamore, market analyst at IG Australia Pty, said that Bitcoin's recent failure to break through historical highs "sounds the alarm."

Tony Sycamore said, "The lack of upward progress in recent weeks is worrying, as there has been a significant inflow of funds into Bitcoin ETFs, but so far it has not been able to reverse the situation." "The next 36 hours are crucial."

Data shows that since the approval of the spot Bitcoin ETF in January, it has attracted a net inflow of $15.6 billion. On Monday, the spot Bitcoin ETF saw a net outflow of $65 million, ending a record 19 consecutive days of net inflows Since the beginning of 2023, Bitcoin has rebounded from a deep bear market and has more than quadrupled to date. However, for speculative assets like Bitcoin, the prospect of rising borrowing costs and potentially high interest rates for a longer period presents a challenging backdrop.

Technical analyst Katie Stockton from Fairlead Strategies LLC stated in a report that based on chart patterns, the short-term outlook for Bitcoin is "neutral," but the long-term outlook is more positive. Meanwhile, Anand Gomes, co-founder of the derivatives platform Paradigm, mentioned that the crypto market is "like an addict," constantly needing positive news to support it, and when there is no good news, "the path of least resistance is downwards"