Bitcoin (BTC) Faces a Ninth Daily Loss as Investors React to the Fed
- Bitcoin (BTC) showed a mixed response to the Fed monetary policy decision and forward guidance.
- In response to a 75-basis point rate hike, bitcoin revisited $22,000 levels before falling back into negative territory.
- Technical indicators are bearish, with bitcoin sitting well below the 50-day EMA.
Bitcoin (BTC) fell for an eighth consecutive day on Tuesday, with investor sentiment toward Fed monetary policy weighing.
Going into today’s session, the correlation between bitcoin and the NASDAQ 100 had also strengthened, with both under pressure in anticipation of a material shift in the Fed’s outlook on inflation and monetary policy.
The Fed didn’t hold back and delivered the markets with a clear message about what lies ahead. Market reaction to the June monetary policy decision and projections was mixed, however.
Market Reaction to a 75 Basis Point Rate Hike Failed to Inspire BTC
On Wednesday, the Fed raised its target interest rate 75 basis points to 1.75%. While larger than a consensus of 50 basis points, the media had floated the prospects of a 75 basis point hike ahead of the policy decision.
In the FOMC statement, the Federal Open Market Committee stated,
“Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low.”
The statement went on to say,
“Inflation remains elevated, reflecting support and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.”
The FOMC touched on the Ukraine war and COVID-related lockdowns in China and their contribution to upward pressure on inflation and the further exasperation of supply chain disruptions.
Looking ahead, the FOMC anticipates that continued increases in the target range will be appropriate.
On the issue of inflation, the FOMC stated,
“The Committee is strongly committed to returning inflation to its 2% objective.”
There were also material adjustments to the economic projections, with the Fed revising down growth projections while revising up the Federal Funds Rate projections, as shown below.
The 75-basis point hike and upward revisions to interest rate projections to a peak of 3.8% in 2023 were BTC negative.
While BTC fell back into the red, the NASDAQ 100 fell back modestly in response to the FED hike and forward guidance.
On Wednesday, the NASDAQ 100 rose by 2.50% to 11,099.16, down from a day high of 11,751.29.
Bitcoin (BTC) Price Action
At the time of writing, BTC was down 1.04% to $21,888.
A choppy start to the day saw BTC rise to an early high of $22,271 before hitting reverse.
Falling short of the Major Resistance level, BTC fell through the First Major Support Level at $20,904 to a low of $20,084.
Finding support at $20,000, BTC returned to $22,150 before falling back into the red.
Market reaction to the Fed rate hike, projections, and Fed Chair Powell’s comments provided BTC with short-lived comfort.
A move back through the $22,057 pivot would bring the First Major Resistance Level at $23,283 into play.
BTC would need plenty of support to break out from today’s high of $22,271 and $22,500.
An extended rally would test the Second Major Resistance Level at $24,438.
Failure to move through the pivot would bring the First Major Support Level at $20,904 back in play. In the event of another extended sell-off, bitcoin could test the Second Major Support Level at $19,677 before any recovery.
Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. Bitcoin sits below the 50-day EMA, currently at $25,876. Today, the 50-day EMA slid back from the 100-day EMA. The 100-day EMA fell back from the 100-day EMA, bitcoin price negative.
A breakout from $22,500 would give the bulls a run at the 50-day EMA.