Hawkish Fed comments result in sideways price action for the crypto market

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(Kitco News) – There was a decline in activity across the cryptocurrency market on Wednesday as crypto traders took stock of the hawkish tone from the Federal Reserve regarding interest rates and what it means for the near-term health of digital assets.

US stocks ended the day mixed after the latest jobs report showed the labor market remains tight amid stubbornly high inflation. Comments by Fed Chair Jerome Powell that “no decision” has been made on the size of the upcoming rate hike did not help matters as it only served to leave investors in a state of uncertainty. At the close of US markets, the S&P and Nasdaq were in the green, up 0.14% and 0.40% respectively, while the Dow ended in the red, down 0.18%.

Data provided by TradingView shows that Bitcoin (BTC) bears managed to break below the $22,000 support level in the early hours on Wednesday before bullish reinforcements arrived to bid it to a daily high of $22,270 near midday. The BTC price has since returned to support near $22,000.

BTC/USD 4-hour chart. Source: TradingView

The solid defense of the $20k support by bulls was highlighted in the morning BTC update from Kitco senior technical analyst Jim Wyckoff, who noted that “March Bitcoin futures prices [were] broadly steady in early US trading on Wednesday, and the bulls are working to keep price action at least sideways.”

As it stands now, “bulls and bears are on an even general technical playing field in the near term, but another price decline is in place on the daily bar chart and bears still have some momentum,” Wyckoff said.

According to analysts at Eight Global, the main takeaway from Powell’s recent comments is that the Fed is struggling to get inflation under control, meaning current policies are not working.

“For this reason, the Fed will have to intervene harder in the near future, and therefore more and heavier rate hikes will be put in place,” they wrote. “So, based on macro factors, we can say that the probability of a weak market in the coming months is higher than the probability that we’re going to have a strong market.”

Focusing on the BTC chart, Eight Global said that “the high range was too strong and was a great place to secure profits. However, BTC is still in an uptrend structure, with the price currently in an interesting zone to make a higher low.”

BTC/USD 1-Day Chart. Source: Eight Global

“The price is trading in a demand zone where a bounce would make sense,” the analysts said. “Falling below this demand zone (~$21.4) will worsen BTC’s outlook and possibly mean a retracement towards the low area. Other than that, there is really little to say about BTC’s current price action. The entire market is currently waiting for a decision by BTC, so it will remain pretty boring until then.”

Altcoins are starting to stabilize

The altcoin market showed some signs of stabilization, but the vast majority of tokens in the top 200 recorded at least a small loss in trading on Wednesday.

Daily performance in the cryptocurrency market. Source: Coin360

Notable exceptions include Voyager Token (VGX), which gained 42.47% to a peak of $0.56, and Bone ShibaSwap (BONE), which surged 17.8% after it was revealed that the public beta for Shiba Inus (SHIB ) tier-two scaling solution Shibarium launches later this week.

The total cryptocurrency market cap is now $1.01 trillion, and Bitcoin’s dominance rate is 42.2%.