Hawkish Fed pushed Bitcoin to 3-month low

In response to a particularly hawkish Fed meeting again, Bitcoin fell to its lowest level in more than 3 months. In fact, the cryptocurrency marked a low last night near $18,600, a level not seen since June 19.

As widely expected by investors, the US Federal Reserve raised the Fed Funds rate by 0.75% to 3.25%.

Given that the market is pricing in a fairly significant probability of a rate hike of more than 1% (from last week’s US inflation above expectations), one would expect relief from Bitcoin and therefore a rebound .

But beyond the widely expected rate decision, aspects other than the size of the rate hike have come to prompt traders to predict a greater tightening of monetary policy than previously thought, hence the reaction between BTC / USD.

It should be noted in particular that the dot-plot graph describing the Fed members’ forecasts in terms of rates was also updated at the time of last night’s meeting. However, this much-watched document showed that the consensus within the FOMC is for a key rate of 4.4% by the end of the year.

Therefore, these forecasts indicate that the Fed should raise rates by another 1.25% by the end of the year. Since we are only two Fed meetings apart from the end of the year, the most likely thing is that the central bank will raise rates again by 75 basis points at its next meeting and then by 50 basis points at the December meeting.

Moreover, Fed Chairman Jerome Powell’s speech after the rate announcement was also hawkish, as he declared that the tightening of monetary policy will remain aggressive, and showed his concern about continued inflation.

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Remember that a tightening of monetary policy generally reduces the appetite for risk in financial markets, creating risks of a recession. This encourages investors to move away from speculative assets like Bitcoin and cryptocurrencies in general.

This reasoning explains the fact that FED policy is the main factor behind Bitcoin’s decline in recent months.

Difficult to see positive for BTC/USD, from a technical point of view

From the crypto technical analysis point of view, the fall of Bitcoin yesterday reinforces the negative profile of the cryptocurrency, which continues to decrease within a falling wedge, as can be seen in the H4 chart below:

Bitcoin, H4 Chart

The lower limit of this channel is currently around $17,600, a threshold whose importance is reinforced by the fact that it is also the 2022 tank. It is therefore an ideal bearish target for traders who believe that BTC/USD will continue to fall.

On the other hand, it is from the key psychological threshold of $20,000 that Bitcoin’s profile would start to improve in the short term. In this case, the next bullish objective could be the ceiling of the aforementioned descending wedge, currently around $21,700.


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