Analysts expect Bitcoin price recovery after Fed leaves rates unchanged

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Bitcoin (BTC) price recovered on May 2 after the United States Federal Reserve decided to leave interest rates unchanged and dampened investors’ hope for rate cuts in 2024. 

The Federal Open Market Committee (FOMC) minutes released on May 1, the Fed said interest rates would stay at 5.25%–5.50%, adding that it would need “greater confidence that inflation is moving sustainably toward 2%” before cutting rates.

The Fed also revealed plans to slow the pace of its balance sheet reductions – the so-called quantitative tightening (QT) – from $60 billion per month to just $25 billion per month.

“Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.”

Market analyst and X user Fejau said the FOMC press release sent mixed signals, being dovish on the balance sheet and hawkish on rate cuts.

Source: Fejau

Nevertheless, the FOMC decision seems to have boosted risk appetite and asset prices. BTC price started bouncing back minutes after the news, rising more than 3% over the last 24 hours to trade at $59,077 at the time of publication.

BTC/USD daily chart. Source: TradingView

Bitcoin’s price rose as high as $59,482 on May 2, leaving market participants wondering whether the downtrend is over.

Bitcoin price is repeating the 2016 cycle

The recent price drop saw Bitcoin hit its lowest level in two months, a 6.7% drop from its price at the halving.

In a recent comment on BTC’s price action, popular trader and analyst Rekt Capital said that the cryptocurrency followed a similar trend after the 2016 Bitcoin halving.

“Bitcoin has once again repeated 2016 history in this cycle by recently deviating to the downside below the current Re-Accumulation Range Low.”

Phases of Bitcoin halving. Source: Rekt Capital

After the 2026 halving event, the “Re-accumulation Range” saw “additional corrections” of up to 17%, lasting as long as three weeks.

“This deviation is -6% thus far,” Rekt Capital added, implying that the BTC price could dip further as standard cycle phenomena still play out.

How much deeper? He noted,

“The answer is not much deeper and for not much longer before Bitcoin finally bottoms.”

Bitcoinprice rebound backed by “crowd capitulation”

A closer look at on-chain metrics provides important insights into Bitcoin’s recovery following the drop to $57,000.

An important metric to consider is the Short-Term Holder Market Value to Realized Value (STH MVRV) ratio, which, according to data from Santiment, currently stands at -6%.

This ratio essentially compares the current price at which Bitcoin is trading (the market value) to the average price at which coins were last moved (the realized value).

According to the market intelligence firm, markets bounce most effectively when the MVRV ratio is in the negative range.

Bitcoin MVRV ratio. Source: Santiment

Another metric pointing to the possibility of a market bounce in the short term is the number of transactions moving at a loss compared to those moving at a profit.

The chart below by Santiment reveals that the ratio of BTC being moved at a loss is higher than transactions of those being moved at a profit.

“This often correlates well with bottoms, as it is a major sign of crowd capitulation.”

Ratio of daily BTC transactions in profit vs. loss. Source: Santiment