Will Bitcoin See A Valentine’s Day Massacre Or Can Bulls Return To $24,000?

Photo by: Joanna Kosinska – Unsplash

The price of Bitcoin has returned to sideways action after a massive rally from its yearly lows of around $16,400. The cryptocurrency has been on the upside on favorable macroeconomic winds, but uncertainty remains significant and could hinder any bullish momentum.

Bitcoin vs. Pow-Pow, a bull run going on

As of this writing, the price of Bitcoin is hovering around the $23,000 level as the market holds its breath for an upcoming interview with US Federal Reserve (Fed) Chairman Jerome Powell. The interview will be published today and will be able to provide insight into the financial institution’s assessment of the current situation.

The crypto market and risk assets, such as stocks, have declined since 2022 because the Fed has raised interest rates to curb inflation. Now the market believes that the financial institution will turn its monetary policy.

Market participants expect Powell and the Fed to change course to prevent the US economy from entering a recession. Recent inflation data suggests that the calculation is on the downside. These two factors are behind the recent Bitcoin and crypto rally.

Last week, during the Fed’s Federal Open Market Committee (FOMC), the Fed chairman was expected to come out “hawkish”, stressing his view that the market must see “pain”, as he did in December 2022. However, Powell gave the market more leeway and hinted at slowing down Fed rate hikes.

According to a report from trading desk QCP Capital, during today’s interview, Powell could “shake things up.” If the Fed issues a hawkish statement to offset last week’s FOMC, the market could see some downside volatility.

Today’s sideways price action reflects the high expectations from market participants. On a positive note, Powell’s statement may provide some clarity. QCP Capital noted:

Hopefully tomorrow’s interview will clear things up for everyone – especially his views on economic conditions, and whether he thinks this boom has gotten out of hand. (…) it appears that inflation had actually fallen faster than what the FOMC predicted in December, compared to our expectation that it was in line with their projections.

Additionally, Bitcoin investors should keep an eye on the upcoming Consumer Price Index (CPI), a proxy for measuring inflation. If the metrics come out higher than expected, any BTC bullish momentum could be limited in the short term. The trading desk added:

After Powell, all eyes will quickly move to the CPI on February 14, with the exception of unforeseen outliers in Friday’s figures for inflation expectations. Will we see a Valentine’s Day massacre or another weak print redemption?

QCP Capital believes that US unemployment should climb above 4%, along with a low CPI, to see the Fed change its policy in 2023. Otherwise, the financial institution will continue to bring more pain to Bitcoin investors.