Bitcoin (BTC) circled $30,000 on May 18 after fresh comments from the United States Federal Reserve sparked volatility.
Analyst: Extra Fed rate hikes “biggest risk”
The pair had come unstuck as Fed Chair Jerome Powell delivered economic policy insights during the Wall Street Journal’s Future of Everything Festival.
“I don’t know if financial conditions have tightened more than this in a very long time,” he told the paper’s chief economics correspondent, Nick Timiraos, in an interview.
Powell appeared to confirm that 50-basis-point key interest rate hikes would continue in subsequent meetings of the Fed’s Federal Open Markets Committee (FOMC) and could reach “neutral” levels in Q4. Hikes afterward, however, could nonetheless continue if necessary to tame inflation further.
With traditional markets already pricing in such a scenario, volatility overall was limited as Powell avoided surprises.
BTC/USD saw a brief drop to $29,500 before recovering during Powell’s words.
With risk assets set for difficult times as financial tightening continues, however, crypto market commentators had little by way of highly bullish news.
“Hawkish reminder. This is the biggest risk for markets,” macro analyst Alex Krueger responded in a series of Twitter posts on the potential for ongoing rate hikes into next year:
“Every Fed official has a different view of what ‘neutral’ is. Estimates are in the 2% to 3% range. Futures markets have now 3.25% priced in by December.”
According to CME Group’s FedWatch Tool, markets expect the target rate to be between 275 and 300 basis points at the FOMC’s December meeting.
$33,000 “makes sense” next
Short term, some saw continued relief for BTC.
“Did manage a nice close above the $28.8K range low as well as the $30K low which marked the initial wick down in May 2021. The next HTF resistance is the $33K area. A test of that area makes sense imo,” popular trading account Daan Crypto Trades summarized in his latest Bitcoin-focused update.
Fellow account DonAlt meanwhile highlighted $34,500 as a crucial breaker for a more bullish perspective on BTC to enter.
This is what I’m looking at, we reclaim $34.5k and I think there is good reason to be bullish towards at least $44k.
While we’re below $34.5k beartarding is allowed, above there less so. pic.twitter.com/CzLY89rPAa
— DonAlt (@CryptoDonAlt) May 17, 2022
“Bottoms take time to form, so do not expect it within the next day or two,” trader Crypto Tony told Twitter followers on the day:
“Likely we will find support, bounce for some relief and to trap late shorts and continue the trend.”
Others, meanwhile, feel that a $20,000 retreat is unlikely.
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