Bitcoin’s price action took a hit on Wednesday following the Federal Open Market Committee (FOMC) meeting and subsequent press conference by Federal Reserve Chair Jerome Powell. While the Fed’s decision to maintain interest rates unchanged at 5.25%-5.5% was widely anticipated, Powell’s hawkish comments regarding the timeline for future rate cuts dashed investor hopes of a move as soon as March. This sent shockwaves through risk assets like Bitcoin, leading to a price drop of over 2% and a decline below the $43,000 mark.
The market had previously priced in a high probability of a rate cut in March based on recent inflation data showing a slight dip in Germany and expectations of similar trends in the US. However, Powell’s statement that the Fed wouldn’t reach “a level of confidence” needed to cut rates by March sent a clear signal that a more cautious approach would be taken. This shift in sentiment triggered a broader sell-off in risk assets, impacting Bitcoin alongside tech stocks and other volatile investments.
Technical
The 4-hour chart shows bitcoin currently trades at $42,214.91, having recently broken below the ascending channel trading pattern and 20-SMA (green line). However, it remains above the 50-SMA (blue line) and 100-SMA (orange line), indicating some underlying bullishness. The 20-SMA trading above the 50-SMA and 100-SMA provides a positive technical signal. However, the recent break below the 20-SMA suggests a potential short-term bearish shift.
The falling RSI currently sits at 42.24, indicating weakening momentum and potential for further downside. Short-term trading opportunities could exist towards the 23.60% Fibonacci retracement level (42,632.18) should the 50 and 100-SMA provide significant support. A break above the initial resistance could signal renewed bullish bias and confirm the bullish momentum, likely bringing the 43,895.58 resistance level into play.
However, a successful break below the SMAs and 38.20% Fibonacci retracement level would leave the 50.00% Fibonacci retracement level (41,218.88) as potential support lower. A break below the 50.00% Fibonacci retracement level, on significant volume, would likely bring the 61.80% Fibonacci retracement level (40,587.17) into play in the short term.
Summary
The Fed’s hawkish stance has cast a shadow over Bitcoin’s short-term outlook. While technical support levels exist, the overall market sentiment leans towards risk aversion. The next key support level to watch is the 50-SMA and 100-SMA confluence around the $41,800 level. A break below this level could trigger further downside pressure, while support could provide a potential bounce towards higher levels.
Sources: TradingView, Trading Economics, Cointelegraph, CoinDesk, Dow Jones Newswire, Federal Reserve.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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