Bitcoin Price Dips Amid Tariff Uncertainty, Investors Show Fear

The cryptocurrency market is showing signs of recovery on Friday, with Bitcoin (BTC) taking a breather near its all-time highs. This comes amid mixed sentiment surrounding tariffs in the United States.

Market Overview: Tariff Tensions Cause Market Swings

Earlier in the week, Bitcoin stabilized near the $110,000 resistance level, with support around $106,000, following the suspension of a 50% tariff on the European Union (EU) until June 9.

While global markets digested President Donald Trump’s tariff pause on the EU, the trade war shifted to the legal arena. A judge ruled on Wednesday that reciprocal tariffs were illegal, stating that President Trump exceeded his authority and violated the Constitution, which grants Congress the power to regulate commerce with U.S. partners.

However, on Thursday, a federal appeals court suspended the ruling that blocked President Trump’s tariffs at the request of the Department of Justice. The White House welcomed the court order, despite triggering a sell-off in global markets, including crypto, which saw its capitalization fall by 4.1% to $3.44 trillion.

Key Data: Crowd Sentiment Shifts as Bitcoin’s Uptrend Weakens

The cryptocurrency market sentiment has generally leaned bullish in May, supported by growing institutional interest and macroeconomic factors like declining inflation.

Data from Santiment indicates that investors have become highly reactive to news, particularly regarding tariffs. Sentiment also mirrors price movements, with the highest volume recorded when Bitcoin reached a new all-time high of $111,980.

Investors who bought into the hype have largely been at a disadvantage amid heightened volatility. Santiment’s latest bi-weekly report notes that this “greed” was reflected in a high ratio of bullish to bearish sentiment, suggesting traders were overly optimistic.

On a positive note, the supply of Bitcoin continues to leave exchanges, signaling a potential bullish push. According to CryptoQuant data, the BTC balance on exchanges currently stands at 2.4 million, down from 2.7 million coins since January 1.

Santiment’s analysis suggests that the downtrend in exchange reserves dates back to when interest rate hikes were halted in 2022. When holders move assets from exchanges to long-term storage, it indicates confidence in future performance, reducing the likelihood of immediate selling pressure and increasing the potential for long-term price increases.

The Mean Dollar Invested Age (MDIA) metric, which tracks the average time coins remain in wallets without being moved, has been on a prolonged downtrend since mid-April, when tariff tensions began to ease, paving the way for negotiations.

Santiment explains that a falling MDIA indicates that older coins are returning to circulation, allowing utility to increase and the asset’s network to grow.

Bitcoin’s technical outlook remains bearish during Friday’s American session, trading around $104,243. Key indicators like the Moving Average Convergence Divergence (MACD) reinforce the bearish momentum as it leans towards the zero line (0.00). Traders are likely to continue reducing their exposure to BTC as the Relative Strength Index (RSI) downtrend extends below the 50 midline.

Key levels of interest include the region around $102,500, which was tested as support in mid-May. The 50-day and 100-day Exponential Moving Averages (EMAs) are poised to provide support at $99,810 and $95,617, respectively, if losses intensify in the coming sessions.

• Bitcoin falls below $106,000 as expectations of a new all-time high diminish amid uncertainty over U.S. tariffs.
• Sentiment turns “extremely fearful” as FOMO-driven investors count their losses.
• Exchange reserves extend downtrend as holders move assets to long-term storage.
• A drop in the Mean Dollar Invested Age metric suggests older coins are returning to circulation, potentially fueling the next rally.

Cryptocurrency Metrics FAQs

What determines the total number of tokens for a cryptocurrency?

The developer or creator of each cryptocurrency decides the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted through mining, staking, or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. Since its creation, a total of 19,445,656 BTC have been minted, which is the circulating supply of Bitcoin. On the other hand, the circulating supply can also decrease through actions such as token burning or mistakenly sending assets to addresses of other incompatible blockchains.

How is market capitalization calculated?

Market capitalization is the result of multiplying the circulating supply of a particular asset by its current market value. In the case of Bitcoin, the market capitalization in early August 2023 exceeds $570 billion, which is the result of the more than 19 million BTC in circulation multiplied by the price of Bitcoin, which is around $29,600.

What does trading volume indicate?

Trading volume refers to the total number of tokens of a specific asset that have been traded or exchanged between buyers and sellers within a set trading schedule, for example, 24 hours. Used to measure market sentiment, this metric combines all volumes from centralized and decentralized exchanges. Increased trading volume often denotes demand for a particular asset, as more people are buying and selling the cryptocurrency.

What is the funding rate?

The funding rate is a concept designed to encourage traders to take positions and ensure that the prices of perpetual contracts match those of spot markets. It defines an exchange mechanism to ensure that future prices and periodic price payments converge regularly. When the funding rate is positive, the price of the perpetual contract is higher than the market price. This means that traders who are bullish and have opened long positions pay traders who are in short positions. Conversely, a negative funding rate means that perpetual contract prices are lower than the reference price, so traders with short positions pay traders who have opened long positions.

Stay ahead of the curve in the fast-paced crypto world – explore the latest updates and trends at Cryptonewsfeeds.com.