As Bitcoin (BTC) navigates the early days of May, investors are preparing for a potentially volatile week driven by critical macroeconomic developments. After reaching a quarterly high of $97,915, BTC has pulled back slightly—down by 3.38%—reflecting a mix of cautious sentiment and profit-taking.

Rather than signaling weakness, analysts suggest this pullback represents a temporary pause, with the market awaiting direction from the Federal Reserve’s upcoming policy decisions and broader liquidity dynamics.

Cooling Inflation Points to Potential Market Shifts

One of the most significant macroeconomic drivers influencing risk assets like Bitcoin is U.S. inflation data. Since the start of 2025, inflation has sharply declined—from 3% in January to just 1.45% today. This drop places inflation well below the Fed’s 2% target and introduces the possibility of looser monetary conditions ahead.

If the Federal Reserve interprets this disinflation as a reason to adopt a more dovish stance, markets could see a wave of liquidity returning. For Bitcoin and other crypto assets, this would be a strong bullish signal.

However, the Fed’s messaging remains uncertain. Any continuation of hawkish rhetoric could trigger another round of risk-off sentiment, where investors flee volatile assets in favor of safer ones.

Big Bets Signal Bullish Institutional Sentiment

Despite the uncertainty, institutional traders appear to be preparing for a positive shift. Notably, a single large player recently opened a $136 million long position in Bitcoin, utilizing 40x leverage. According to AMBCrypto, such high-leverage bets typically reflect confidence in a near-term rally—especially when placed ahead of major macro events.

This kind of aggressive positioning often precedes large price movements, as high-leverage trades can either magnify gains or accelerate liquidations, depending on market direction.

Liquidity Landscape Suggests Incoming Price Whipsaws

Beyond inflation and Fed policy, Bitcoin’s liquidity dynamics are becoming increasingly tense. On the 12-hour chart, analysts have identified three dense liquidity zones—each holding over $50 million in open interest. These clusters create pressure points where price volatility can spike, especially if one side of the market becomes overleveraged.

A prime example of this occurred recently at $94,760.69. At that level, nearly $48.2 million in long positions were wiped out during a sudden liquidation event. This sharp selloff triggered a rapid plunge to $94,600, showing just how sensitive the market is to large-scale liquidations.

Despite this, perpetual futures data shows a continued dominance of long positions, suggesting most traders still anticipate higher prices. However, this imbalance also means the risk of another cascading liquidation remains high—particularly if short-term market sentiment shifts.

What to Expect Next: Breakout or Breakdown?

Structurally, Bitcoin appears poised for a decisive move. The current price range has tightened, and the market is entering what analysts describe as a “compression phase.” Historically, such phases often lead to explosive directional moves—either to the upside or downside.

The next major catalyst is the Federal Open Market Committee (FOMC) meeting. If the Fed signals a policy pivot toward easing, Bitcoin could experience a sharp rally as traders pile back into risk assets. On the other hand, continued hawkishness could pressure BTC lower, particularly if liquidity is pulled from the crypto derivatives market.

Conclusion: Volatility Is Inevitable—But Direction Hinges on the Fed

Bitcoin investors should prepare for heightened price swings this week, as the combination of macroeconomic data, Federal Reserve signals, and liquidity pressure builds. While institutional bets and long positioning indicate optimism, the looming risk of forced liquidations and sudden sentiment shifts remains.

With inflation cooling and the Fed at a crossroads, Bitcoin’s next major move could be swift and significant. Whether it’s a breakout toward $100,000 or a retest of lower support zones, one thing is clear—volatility is back, and traders should buckle up.