Bitcoin has been rangebound since Tuesday, sending mixed signals about how the price may move after the Fed announces its decision on rate cuts.
Investors expected a significant decline during the previous intraday session. This expectation was due to the apex coin being on the rise since last Thursday. It is also worth noting that there is a CME gap at $111k that needs to be filled.
However, BTC surged above $116k but retraced shortly after, dropping to a low of $112,218. Although the day ended with slight losses, it failed to close the gap. It had another significant increase on Wednesday but retraced and is trading at $112,435.
On the 1-day chart, the apex is declining, but not as many expected. It has since lost almost 2% this week as traders remain fixated on the FOMC. Nonetheless, the question of how the FOMC will affect Bitcoin still hangs in the air.
Lessons from Previous FOMC
The last rate happened on Sep 17, and prices failed to impress. Representing price actions on that day is a red doji that indicates slight volatility but no significant price change. However, before the announcement, the apex coin had a considerable increase.
On the 7th, the climb started and continued for most of the week. Noteworthy was the price action on Wednesday, when the largest coin surged from $111,551 to $114,348. It ended the day up more than 2%.
The hike continued into the next two days, and the asset peaked at $116,780 and crossed $117k a few days later. However, the cryptocurrency remained rangebound in the days leading up to the rate decision.
Bitcoin failed to surge following the rate cut and saw massive losses a few days later. One reason for the reaction was that the cut was priced in before the announcement.
Recent price action shows the apex coin has been in an uptrend since last week, gaining over 6% before its retracement. Some analysts concluded that prices may play out as the previous FOMC. They concluded that the rate cut is already priced in.
However, there is a difference between then and now. Bitcoin consolidated for some days, leading to the cut, then retraced afterward. This time, it registered slight declines following its recent surge and may be gearing up for more decline.
The current price trend suggests room for further increases in the event of a positive FOMC outcome. While many already know what the decision will be, the selling suggests whales are selling and may buy back after Powell’s address.
QT. The Difference
On Oct 14, Federal Reserve Chairman Jerome Powell hinted that the Fed would end Quantitative Tightening (QT). In his address, he noted that the US labor market continues to underperform due to low hiring and “low-firing doldrums through September.”
Powell stated that the policymakers may cut interest rates further if the job market weakens and inflation remains above the 2% target. These statements were nothing new and merely reiterated what investors expected.
However, the new information from his address is that the central bank’s effort to shrink its holdings, or quantitative tightening, may end soon. Several crypto proponents expressed their approval over the move, saying it would significantly boost the crypto market. Nonetheless, prices failed to keep pace with the reaction as BTC lost over 2%.
Investors are expressing optimism over the end of QT and expect an announcement on Wednesday, along with the rate cut. Unlike when Powell hinted at it, social media interactions suggest BTC will surge.
Comparing the last FOMC with the current one produced two differences, one in price and the other in policy. These differences may be what changes will change the outcome of the current event.
How Will Bitcoin React?
One of the primary concerns was that Bitcoin did not close the CME gap during the previous intraday session. It filled it a few minutes ago, dropping to a low of $110,962. The filling is significant; there was a fear of a massive drop to this level after the FOMC. However, dropping to the mark reduces the magnitude of the decline.
Bitcoin has since been on the rise, trading at $111,788 at the time of writing. With the announcements drawing close, prices may remain slightly stable until the announcement.
Nonetheless, the 1-day points to massive surges ahead. Several analyses noted that key indicators are now bullish. For example, the moving average convergence divergence displayed a positive crossover a few days ago. The relative strength also rose as buying pressure increased.
However, the bollinger bands is printing new signals. A closer look at the chart shows there was a period when the metric was at its widest. Recent readings show that the reverse is happening at the time of writing. Nonetheless, since Monday, the asset has maintained trading above the middle band.
When bands tighten, it means the asset is gearing up for a decisive breakout. Readings from indicators and the upcoming event suggest a bounce to the top. The upper band may be the target, meaning a surge above $116k may happen soon.
Away from indicators, Bitcoin is trading slightly below the 28% fb level. Previous price movement provides a guarantee that after flipping the mark, the next target will be the 38% fib mark at $114,672.
However, there is a significant sell wall above the 38% mark. Nonetheless, breaking this barrier will result in an attempt at the 50% fib level, close to $117k.
Conversely, if fundamentals fail to yield the needed result, a massive decline will follow. Bitcon may sink as low as $108k.
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