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Wednesday saw Federal Reserve chairman Jerome Powell announce that U.S. interest rates would stay as they are. A slightly hawkish speech implied a future rise. How will Bitcoin react?
Fed urges caution
Fed chairman Powell did his customary jawboning after it was announced that interest rates would stay as is. However, during his speech Powell made sure to suggest that another rate hike could be likely, and as early as this year.
The Federal Reserve looks like it is still very worried about a renewed spurt of inflation, especially given rising energy prices among other factors. With a year to 18 months before interest rates really start affecting the economy the Fed is probably groping in the dark as it tries to anticipate how things will pan out.
Powell expressed caution, saying: “Given how far we’ve come, we are in a position to proceed carefully”. He added: “We want to see convincing evidence that we’ve reached the appropriate level of interest rates”.
Fed officials have changed their forecasts of rate cuts going into next year, predicting that cuts might happen later in 2024 than they first imagined.
A difficult outlook for crypto
So where does this leave crypto? During Powell’s speech Bitcoin went down to support at $26,800 and rose back over $27,000 afterwards. Since then the price has meandered back down to rest at the bottom of a short term triangle forming since Tuesday. This is a good support level so it remains to be seen if it will break down.
Looking at a more macro picture, the Fed’s signalling of at least one more rate hike, and with projected cuts being put further out into 2024, this might put the crypto bull market on hold for longer.
On the Bitcoin monthly Stochastic RSI chart, which gives us momentum direction for the next 6 months or so, a cross downwards from the signal lines is a very powerful indicator of momentum to the downside. The month end is still nine days off though, so there is still time for Bitcoin to avoid this.
If this cross should play out to the downside it might mean that Bitcoin comes back to test its base all the way down at $16,500. For those looking to make money on Bitcoin in the short term this would be awful news. However, for those who understand what Bitcoin offers, this would be an amazing extra opportunity to buy some very cheap freedom.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice