Fed Policy Sparks Market Reaction
Short-term traders initially expected the Federal Reserve to adopt a more dovish stance, but as monetary tightening policies continued, the market quickly reversed. Funds flowed into low-risk assets such as bonds and cash, putting downward pressure on high-risk assets like Bitcoin.
The central bank's latest statement extended the timeline for interest rate cuts to mid-2026. Traders had previously anticipated a potential easing of policies this year, and the sudden shift in expectations led to significant volatility in Bitcoin's price, increasing market volatility.
Derivatives Market Intensifies Selling Pressure
Market liquidity analysis indicates that derivatives were the primary catalyst for this price decline. On-chain analyst IT Tech noted that during the price drop, the trading volume of perpetual contracts was 12 times that of spot sales. Key indicators between the two markets showed significant divergence during the correction.
The cumulative trading volume of perpetual contracts fell by over $506 million, while the decline in the spot market was relatively modest at just $40 million. Funding rates also turned negative, reaching -0.0024%, indicating that short positions began to dominate and were willing to pay to maintain their active bets.
IT Tech analysts stated, “The selling pressure in derivatives is 12 times that of spot. The price doesn’t lie—perpetual contracts drove this decline… Funding rate: -0.0024% (shorts paying longs—net short market).
In this environment, derivatives traders, rather than retail spot participants, dominated the price movements of the day. With the increase in open contracts for short positions, the potential for a rapid short squeeze is also rising, especially if spot buyers re-enter the market at key technical levels.
Order book data shows that buyer interest remains above $70,000, with strong support from buyers in both the spot and perpetual contract markets. The spot delta registered at 670.92, while the perpetual contract delta approached 1300, reflecting an ongoing tug-of-war between bulls and bears.
Market participants are now focusing on the Fed's next meeting scheduled for May 6-7, as well as the upcoming release of new consumer price index and personal consumption expenditure data, both of which are expected to significantly impact Bitcoin's short-term trajectory. Additionally, geopolitical tensions in places like Iran are adding uncertainty to risk assets.