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Investing.com – Last night’s Fed meeting saw a burst of market volatility, including in and around cryptocurrencies, with a two-pronged reaction.
Bitcoin indeed jumped on the news of the rate hike at 7pm, which confirmed as expected the FOMC’s decision to raise the Fed Funds rate by 0.75% once again. But the Fed statement that accompanied that announcement contained material that was interpreted as dovish.
Bitcoin’s two-step reaction to the Fed meeting
The Fed said in its statement that it “will take into account the cumulative tightening of monetary policy, the delays with which monetary policy affects economic activity and inflation”.
This was interpreted as a clear signal that the Fed was preparing to slow rate hikes, which sent Bitcoin off to a peak towards $20,800, from $20,400 before the announcement.
However, the cryptocurrency then reversed its gains and more during Jerome Powell’s press conference which kicked off 30 minutes after the rate announcement. The Fed chief indeed repeated that inflation is far too high, stressing that price stability is essential for the US economy, saying that the Fed will continue on the current path “until the work is do “.
Importantly, he expressly stated that the data suggests that the final rate level will be higher than previously anticipated. In the opinion of several Fed specialists, this puts on the table a final rate potentially higher than 5%. This therefore sent Bitcoin lower, so that the cryptocurrency approached the $20,000 threshold in the evening, with a low of $20,080.
The Key $20,000 Threshold Remains Safe, But Bitcoin Faces a Major Hurdle
From a chart perspective, note that the $20,000 area confirmed its key support status by halting the fall of BTC/USD yesterday. This is indeed the third time since October 25 that this threshold has halted a correction in the cryptocurrency, as seen on the hourly chart below:
This chart also shows that Bitcoin is still in the declining channel that accompanies its decline from the October 29 peak. Bitcoin has so far rebounded to around $20,400, but the cryptocurrency’s near-term profile will only start to improve if it breaks through the upper boundary of the downtrend channel, currently around $20,500. Then, the next potential resistances to take into account will be located at around $20,800 and $21,000. A step back on the daily chart also shows that the 100-day moving average, currently at $20,750, has been playing the role of resistance since October 26.
In other words, the $20,500 / $21,000 zone looks like a very important resistance whose rapid crossing is required to maintain the beginning of the upward momentum observed since October 25.
If, on the contrary, Bitcoin takes the path of decline, we note that a break below the $20,000 zone would put the next support in sight near $19,700.