Bitcoin Rebounds as Tech Earnings Boost Market Sentiment, but Short-Term Challenges Persist

This excerpt is from the CoinDesk newsletter 'Daybook.' To stay updated, sign up here. Bitcoin surged to $77,400, mirroring the rise of other risk assets following the release of earnings reports from major US tech companies, which helped stabilize the markets. The upward trend was fueled by Apple's earnings report, which, along with those of Google's parent company Alphabet, Microsoft, Meta, and Amazon, showcased double-digit revenue growth. These reports bolstered investor confidence in the AI growth narrative, drawing them back into equities and crypto. However, the current bounce is attributed more to relief buying than a conviction that a new rally has begun. According to a note from crypto exchange Mercado Bitcoin, the market is experiencing short-term pressure due to mixed structural factors, including diminished hopes for rate cuts, outflows from ETFs, and heightened geopolitical risks. Despite oil prices surging and over $400 million in outflows from spot bitcoin ETFs, crypto prices remained steady as April came to a close. The ongoing conflict in Iran and disruptions in the Strait of Hormuz could lead to higher crude prices, fueling inflation and making central banks less inclined to cut interest rates. This scenario could negatively impact crypto and other risk assets by making cash and bonds more appealing. The Federal Reserve's decision to maintain rates at 3.50% to 3.75%, with four dissenting voices, led to a repricing of policy expectations. As stated by Rony Szuster, head of research at Mercado Bitcoin, 'In the short term, the market is expected to remain volatile and highly reactive to economic data. In the medium term, the structure will depend on the stabilization of institutional flows and the path of global monetary policy.' With Jerome Powell's term as Fed chairman ending on May 15 and Kevin Warsh expected to chair the June FOMC meeting, potential volatility looms due to Warsh's preference for tightening monetary policy. The crucial test for bitcoin remains at the $80,000 mark; breaking through this level could attract new buyers, while a failed attempt may trigger selling if leveraged long positions are unwound. For further analysis of today's altcoin and derivatives activity, see Crypto Markets Today, and for a comprehensive list of this week's events, refer to CoinDesk's Crypto Week Ahead.