Have Bitcoin and Ethereum hit their bottoms? Will BTC and ETH hold above support levels after FOMC decisions?
During turbulent times, every FOMC meeting may become crucial for investors and speculators, giving hope for a bright future. On December 13-14, the Fed raised the key rate by 50 basis points to 4.25%-4.5%.
It has been the seventh rate hike since the beginning of 2022 when the rate stood at 0.25%.
|
Date of meeting
|
Rate
|
|
December 14, 2022
|
4.50%
|
|
November 2, 2022
|
4.00%
|
|
September 21, 2022
|
3.25%
|
|
July 27, 2022
|
2.50%
|
|
June 15, 2022
|
1.75%
|
|
May 4, 2022
|
1.00%
|
|
March 16, 2022
|
0.50%
|
|
January 26, 2022
|
0.25%
|
The pace of rate hikes slowed down in December but the market has barely noticed this. As a rule, such news boosts prices in financial markets but this time, we witnessed the opposite reaction.
What did go wrong?
Firstly, economists expected a slowdown in Fed’s rate hikes back in the fall.
Secondly, the regulator adjusted its forecasts for future rate hikes.
By the end of 2023, the key rate may reach 5.1% against the previously forecasted figure of 4.6%.
Besides, the outlook was adjusted for 2024 and 2025.
The Fed remained hawkish and markets plunged.
Markets at the moment:
- NASDAQ100 -2.5%
- S&P500 -2.0%
- BTCUSD -2.5%
- ETHUSD -2.0%
Investors' fears were reasonable as the regulator confirmed that it did not plan to halt rate hikes in the near future. High interest rates may remain for a long time. This fact is likely to limit the growth potential of the US stock market and the cryptocurrency market.
At a recent press conference, Jerome Powell said that the regulator would continue combating high inflation. Powell also confirmed that the key rate would not be lowered in September 2023.
The main points of Jerome Powell's speech:
- We have covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt
- Higher interest rates and slower output growth also appear to be weighing on business fixed investment
- It will take substantially more evidence to give confidence that inflation is on a sustained downward path
- What we're writing down today is our best estimate of what we think that peak rate will be based on what we know
- Our decisions will depend on the totality of incoming data
- The strong view on the Committee is that we'll need to stay there, you know, until we're really confident that inflation is coming down in a sustained way
What should investors be ready for?
If the Fed continues monetary policy tightening, the US stock market is unlikely to turn bullish in the short term. Meanwhile, if stocks move sideways or plummet, it may damage the crypto market as it is strongly correlated with US tech stocks.
Bitcoin and Ethereum trading charts
Overall market picture:
- Bitcoin has not reached a new low for 25 days
- Ethereum has not reached a new low for 181 days
- BTC gained 14% from the swing low on November 21
- ETH gained 24% from the swing low on June 18
- The Fear & Greed Index stands at 31 points, indicating bearish market sentiment
Bitcoin analytical review
The price returned to $18,000. It should be perceived as a bounce from the low of the downtrend. The level of $15,000 offered support. Despite the fact that the price soared by almost $3,000, a reversal is unlikely to occur. The asset is still trading within the downtrend and may hit a new low. Thus, BTC may still hit a new bottom.
The Fed and its monetary policy significantly affect the market trend. Developments in the crypto industry have an influence on the crypto market too. The ongoing FUD has been amping up the downtrend since the beginning of the year. The market has not recovered from the collapse of one of the largest crypto exchange, FTX. Thus, investors are raising concerns about the largest crypto-exchange, Binance, which is accused of possible money laundering and violation of sanctions.
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This news background harms the entire industry, as a result, it limits the possible growth of the crypto market.
In this connection, if BTC dips to $15,000, the downtrend may continue.
This is likely to open the way to $13,000 and $10,000.
Ethereum analytical review
Ethereum has not reached its swing low for half a year. However, it does not indicate that the asset will see a promising future. In fact, ETH has been declining since mid-August when it touched the resistance level of $2,000. Since then, the asset has already lost 35%. As a result, the price returned to the swing low.
The psychological level of $1,000 still acts as support. In June, this strong level put strong pressure on bears and prevented the price from falling below. Traders bet on a trend reversal near this level. Meanwhile, if ETH drops below $1,000, the medium-term downtrend may continue.
