What’s next as the Fed rate hike approaches?
Bitcoin bears have gained control in recent weeks, at least in the short term, and the battle looks set to continue. After Bitcoin again failed at the $30,000 level on Sunday as part of a “weekend pump”, the bears are pushing towards $27,000.
As of press time, Bitcoin was hovering around $28,000, having tested key support at $27,800 last night (EST). The long-term trend continues to be clearly in favor of the Bitcoin bulls, as a price above $25,000 speaks for. In the short term, however, the key is to defend the $27,800 level to avoid a deeper correction to $25,000, as also suggested by analyst XO.
$BTC pic.twitter.com/OKS791fYEi
— XO (@Trader_XO) 1 May 2023
Bitcoin remains in the trading range
For technical analyst Michaël van de Poppe, founder of Eight Global, the trend-setting price level is to break through $28,400 on the shorter time frame. “We break through $28.4K and we could be back to $30K in a few days. Not breaking and folding coming days, $25K next. Big volatility on the horizon,” the analyst warns.
However, the current weakness shown by Bitcoin hovering around $28,000 could be an indication that another weakness towards the lows is needed to generate new upside momentum. “Still looking at $27.8k for a potential long here, or a break and turn at $28.4 for Bitcoin,” van de Poppe notes.
Glassnode co-founders Yann Allemann and Jan Happel write in their latest analysis that Bitcoin’s month-end in April was a big sign for the bulls. BTC closed in the green for the fourth consecutive month. According to the analysts, the short-term trading channel is between $27,000 – $29,200.
[B]out we are confident we will be over $30k in no time. Our thesis solidifies the longer we are above the very active level of $28 – $28.2k. Note the large horizontal line.
All eyes on the Fed
The key to price action in the coming weeks could be the FOMC meeting tomorrow, Wednesday, and the subsequent press conference by Fed Chair Jerome Powell. The market expects a final increase of 25 basis points. This will put the US benchmark interest rate at the same level as before the financial crisis in 2007.
However, the decision has probably already been priced in. More important will be the FOMC press conference at 2:30 p.m. EST, when Powell will give his comments for the coming months.
The market will be hoping for a comment from Powell that this was the last rate hike and that the first rate cuts will come later this year (highly unlikely). The focus will also be on Powell’s comments about the banking crisis and how the credit crisis is intensifying.
Most likely, Powell will play both sides, as he did at the March FOMC meeting. Comments such as “inflation is not quite where we want it to be”, “monitor developments in the banking sector” and “data addiction” are practically guaranteed. On the positive side, Powell could signal a pause in June and leave a door open for rate hikes if the data warrants it.
Lol…unstable day coming tomorrow, and maybe a decisive trend setter for the coming weeks. The start of a new one #Bitcoin rally?
— Jake Simmons (@realJakeSimmons) 2 May 2023
At the time of writing, Bitcoin was trading at $28,100, below the intermediate level after rejecting the high area again. Until the FOMC decision, it seems quite unlikely that BTC will make a big move unless there is another short or long squeeze due to the madness in the futures market. A recapture of the upper range would be a bullish sign going into the FOMC.
Featured image from iStock, chart from TradingView, com
