Bitcoin Shows Weakness Ahead Of FOMC Meeting, Is A Dump Coming?
The Bitcoin price is currently struggling after emerging from a turbulent weekend. Most of the digital asset’s reaction has been against the FOMC meeting which will be held on 2-3. May, at the end of which the CPI data will be released. As has been the case with the previous FOMC meetings, the price of Bitcoin has fallen back as investors await the Fed’s announcement.
Bitcoin underperforms ahead of FOMC meeting
Bitcoin had a rough start to the week as the price of the digital asset fell back to the $27,000 level. There has been some improvement since then, but it has not been significant. Furthermore, bulls are having a hard time holding on to the $28,000 support as this is a seller’s market. As a result, BTC is now looking towards support at a much lower level.
Much of the subdued sentiment has been in response to the FOMC meeting. Expectations for the latest release of CPI data vary, but crypto participants would benefit more if inflation were to come lower. This is because lower inflation rates create higher risk tolerance, and thus risky assets like Bitcoin tend to enjoy a lot of support during such times.
However, if the Fed were to return to a hawkish stance as they did in 2022, it could be very bad for the market. Lower inflation rates actually lead to the Fed being more dovish, as has been the case in the first quarter of 2023, which was very favorable for Bitcoin and cryptocurrencies in general.
Another interest rate increase is expected, but it depends on how much the increase is. An increase of 25 bps will be beneficial for risk assets, but crossing the 50 bps mark is likely to cause a dump in the market.
BTC weakens for the first time in 2023
At the start of 2023, Bitcoin moved very strongly, peaking almost 100% higher than the value it started the year with. However, most of the euphoria sparked by the mini-bull run has since worn off, with investors who bought at cycle lows taking profits from the market.
BTC weakens ahead of FOMC meeting | Source: BTCUSD on TradingView.com
Since BTC’s local peak was above $31,000, it has slowly weakened over time. The current price of just above $27,000 puts the digital asset below its 20-day moving average, indicating bearishness, especially in the short term.
However, the weakness has not affected the long-term bull case for BTC as it remains well above the 100-day and 200-day moving averages. Both of these show that investors prefer to wait for higher prices in the long term rather than chasing short-term profits.
Bitcoin’s performance for the rest of the week will largely depend on the FOMC announcement. As usual, the market is expected to be extremely volatile in the hours leading up to the announcement. But where the price lands will depend on the Fed’s decision.
