Why Sell In May Might Not Work This Time For Bitcoin

Bitcoin pushes up on the last day as the market prepares for the upcoming speech from the U.S. Federal Reserve (FED) Chairman Jerome Powell. Despite the recent gains, the general sentiment in the crypto market remains bearish.

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At the time of writing, Bitcoin trades at $38,800 with a 1.5% profit in the last 24-hours.

BTC moving sideways on the 4-hour chart. Source: BTCUSD Tradingview

The first cryptocurrency by market cap could surprise market participants. Some operators have started predicting a massive crash ahead of Powell’s intervention.

The old market adagio “Sell in May and go away” seems more present than ever as the sentiment turns fully fearful. In a recent report, trading firm QCP Capital revealed their chain is biased as the bearish sentiment seems “slightly over-extended”.

In that sense, the firm claims that market participants could have priced in any FED announcement “too aggressively”. Thus, if the financial institution seems dovish or announces an interest rate hike within expectation, the crypto market could be poised for some relief. QCP Capital said:

With bearish sentiment at extremes, we could see a potential short squeeze in the near-term. This might be the rally we have been waiting to sell into as the multiple-compressing effect from QT and recessionary pressures from the rate hikes begin playing out (…).

This could take some months before it comes into effect. In the meantime, BTC might break back above the $40,000 levels.

As NewsBTC reported, there are two scenarios for global markets in 2022. An aggressive or dovish FED. The latter is the best for the price of Bitcoin and other risk-on assets.

Why Bitcoin Could Benefit From Market Anticipation

The financial institution could be softer at the execution of its monetary policy if the market reacts ahead of future announcements. QCP Capital believes this is already happening:

(…) price reactions in anticipation of the FED are effectively serving the FED’s goals. Powell said on 21 April that he was pleased that markets have reacted to the FED’s hawkish indications. (…) we have seen some of the largest moves across markets in years.

The firm claims that market participants expect as much as 75 basis points (bps) interest rate hikes. This is a highly aggressive approach which means that anything below that could be beneficial for Bitcoin and the crypto market.

In that sense, QCP Capital claims the market is doing the FED’s job by keeping prices down and reacting to announcements. The firm added: “this gives the FED more breathing room in their fight against inflation”.

Moreover, QCP Capital believes inflation might be finally reaching a peak. Thus, why the FED might dial down on its rhetoric, or at least it will allow it to stay within expectations.

Related Reading | Bitcoin Taker Buy-Sell Ratio Rebounds Back Into “Hold” Zone

In case of potential downside ahead of Powell’s speech, the firm pointed at BTC’s price 50% retracement from its all-time high around $36,400 and its 61.8% retracement at $28,700.