The Bitcoin (BTC) price remains close to $26,000 in anticipation of Wednesday’s key US Federal Reserve policy announcement. The US central bank is expected to pause the cycle of aggressive interest rate hikes that have seen the bank lift rates by 500 basis points (to 5.0-5.25%) in the past 10 meetings. Moreover, the Fed will release updated economic projections and a new “dot plot” alongside the usual policy statement and post-meeting press conference with Fed Chair Jerome Powell. As a result, Wednesday’s meeting has the potential to trigger significant volatility in crypto markets.
Bitcoin has been under pressure since mid-April due to markets pulling back on rate cut bets for the second half of 2023 and uncertainty surrounding the US regulatory outlook as the US Securities and Exchange Commission (SEC) takes action against Coinbase and Binance. Many analysts expect Wednesday’s Fed meeting to be a “hawkish pause,” which could worsen bitcoin’s short-term headwinds.
Although the Fed is predicted to leave rates unchanged, the bank is expected to keep the door open for further rate hikes, strengthening expectations for a July hike. The CME’s Fed Watch Tool presently prices in a 65% probability of 25 basis points (or more) worth of rate hikes by July. Additionally, the economic projections are likely to indicate the Fed’s anticipation of persistent inflationary pressures, preventing the dot plot from signaling near-term rate hikes. This may lead markets to further pull back on rate-cut bets for the end of 2023.
However, Tuesday’s softer-than-expected headline Consumer Price Index (CPI) inflation reading supported the case for a pause, while the hot core CPI readings suggest “higher for longer” interest rates. Money market pricing still implies about a 22% chance of at least 25 basis points worth of rate cuts from current levels by year’s end. A further pricing out of rate cut expectations for 2023 could lift US yields, which may support the dollar and weigh on yield-sensitive assets like gold and bitcoin.
Despite recent increases in yields and uncertainty due to the SEC’s actions against major players in the US crypto industry, bitcoin continues to hold above long-term resistance-turned-support in the $25,200-400 area. However, in the last few months, bitcoin has been trending lower within a bearish trend channel and is now below its 21, 50, and 100-Day Moving Averages, suggesting significant bearish momentum. Adding to the concerns, the widely followed Moving Average Convergence Divergence (MACD) just sent a strong sell signal.
As a result, some market participants believe that bitcoin could soon be headed lower, with bears eyeing the 200-Day Moving Average (DMA) around $23,700. Conversely, others remain hopeful that the US Federal Reserve’s policy announcement might provide support to the digital asset. Wednesday’s meeting has the potential to be a turning point for bitcoin, and the market eagerly awaits the outcome.
Source: Cryptonews
