Monday, March 4, 2024

Will Bitcoin Break Below $40,000? FOMC Decision Looms Large.

Prior to the Federal Open Market Committee (FOMC) meeting on December 13, the price of bitcoin (BTC) was declining. Following the release of the Consumer Price Index (CPI) data, which provided some respite by indicating that US inflation has dropped to 3.1% in line with market forecasts, Federal Reserve Chair Jerome Powell is scheduled to offer an overview of the economic outlook.

Bitcoin price braces for more volatility ahead of FOMC
The 40% decline in trading volume over the previous day is proof that investors are being cautious and de-risking ahead of the FOMC meeting. The price of Bitcoin only momentarily surged to $42,000 following the announcement of the US CPI data in November before declining.

Most people predict that the Fed will maintain interest rates in their current target range of 5.25 to 5.50% in the future. The FOMC kept rates constant at its most recent meeting in November and its September meeting, signaling that they might stay that way for the foreseeable future but that they would be willing to adjust their position in response to changing economic circumstances.

The Fed needed more time to assess whether the existing rates were truly keeping inflation at bay at the price of economic growth; thus, delaying rate hikes was a mostly expected result.

At the July meeting, the rate was hiked from 5.25% to 5.50%, which signifies 11 rate hikes over the 2022–2023 cycle, all of which are intended to control inflation. It clarifies the instability in the price of Bitcoin.

Implications for the Bitcoin Price
Rising interest rates make investors more cautious, which effectively causes them to shun riskier assets like cryptocurrency. The Federal Reserve is expected to maintain the Federal target rate between 5.25% and 5.50% at the forthcoming FOMC meeting, according to the CME FedWatch tool, with a 97.1% probability. However, 2.9% of opinion surveys predict a move to between 5.50 and 5.75%.

It is important to acknowledge that there is less confidence between November 10 and December 13. The expectation of a stable 5.25% to 5.50% has decreased from 99.8% to 97.1% in less than 48 hours as more market observers expect a potential target rate change to 5.50%–5.75%.

In the meantime, the volatility in the price of bitcoin increased by about 5% between December 10 and December 13, rising from 29.20% to 33.81%.

The market is still clinging to the psychological threshold of $40,000. Investor nervousness is reflected in the low Relative Strength Index (RSI).

Because the FOMC lowers interest rates relative to the yields on dollar-dominated assets, investors look for rewards elsewhere. Because of this, the price of Bitcoin may rise if the Fed raises its objective to 5.50%–5.75% in response to increasing demand. Similarly, if the Fed sticks to the 5.25%–5.50 barrier, the price of bitcoin might not change much or might even decline.

In any case, a probable range is emerging, and before a more substantial downturn, a move to $48,000 is still likely, although the $37,800 mark is still crucial for the price of Bitcoin to rise. Losing the previously indicated level might be the catalyst for Bitcoin’s decline to $32,000, or, in the worst scenario, all the way to the psychological level of $30,000.

Cryptured Team
Cryptured Team
The writers team at Cryptured.com is composed of passionate and experienced journalists who cover the latest developments in the crypto and blockchain space. They aim to provide accurate, unbiased and easy-to-understand news and information for their readers, as well as insights and analysis from industry experts. The writers team is always on the lookout for new and exciting stories that can help the general public learn more about the potential and challenges of these technologies.
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