Here’s why Bitcoin price gave back all its intraday gains
On December 14, the price of Bitcoin (BTC) hit a 1-month high and saw a brief resurgence in bullish momentum, but the Federal Reserve’s Federal Open Market Committee (FOMC) hawkish report and comments from Fed Chair Jerome Powell sent BTC to an intraday low of $17,659.
Stocks and Bitcoin started the day slightly up, but quickly pulled back on the FOMC report. To date, the Bitcoin price remains closely correlated with stocks, and a majority of investors have concerns about the impact of further interest rate hikes in the future.
Rising interest rates and hawkish talk from Powell are affecting the BTC price
While the Consumer Price Index (CPI) report showed inflation slowing at 7.1%, Powell still wants to reach 2% headline inflation. Inflation has been a key factor in raising interest rates, and the current 0.5% increase had consensus among FOMC participants. The Fed members also agree that interest rate increases should continue in 2023.
During the December 14 press conference, Powell stated:
“We may see higher interest rates for a longer period to reach the 2% inflation target”
This hawkish tone, combined with the FOMC survey, shows that interest rates will continue to rise for the foreseeable future.
What will Bitcoin do next?
The short-lived Bitcoin rally ahead of Powell’s speech correlated with the price action seen across other risk assets. After the FOMC and Powell’s speech, these assets continued to pull back, and some analysts see the latest decline as a calculation to buy more Bitcoin.
Late long to the current rally may also be at risk of unwinding if the BTC price continues to retreat. According to derivatives data, Bitcoin open interest shows that 60.16% of traders are long.
Currently, the market is digesting the views expressed by the FOMC and Powell, so an increase in short-term volatility is not abnormal. Investors should keep an eye on the next daily bars to see if Bitcoin’s macro trend has changed.
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