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Bitcoin (Bitcoin) experienced a weak rally on Sept. 21, sending the US dollar to new annual highs as investors await the Federal Open Market Committee’s interest rate decision on Sept. 21.
BTC price held up to $19,000, registering a slight gain of 1.33% per day. Meanwhile, the US Dollar Index (DXY), which measures the US dollar’s strength against major pools, rose to 110.86, its highest level in 20 years.
The Federal Reserve is Calm down We discuss how far the benchmark lending rate can be raised to keep record inflation in check. Interestingly, the market expects the US central bank to raise rates by 75 or 100 basis points (bps).
The impact of higher interest rates is likely Reduced appetite for riskier assets stocks, virtual currencies, etc. Conversely, the US dollar serves as a go-to safe haven for investors fleeing risky assets.
“There appears to be no reason for the Fed to soften its hawkishness at the recent Jackson Hole symposium. [0.75 percentage point] A ‘hawkish rate hike’ should keep the dollar near its highs this year,” ING analysts said. Said Financial Times.
Independent market analyst PostyXBT claims that a rate of 100 bps could drop Bitcoin “larger” than its current technical support of $18,800. He also suggests that BTC is likely to recover if the rate hike turns out to be lower than expected or 50 bps.
$BTC 1D
As we FOMC experts know, today is a big day!
Is support for potentially 100bps nukes enabled?
50bps maybe up and give the bulls some breathing room?It’s going to be a very interesting end to each day. https://t.co/C5ClM436N6 pic.twitter.com/mJP7qpGEv1
Posty (@PostyXBT) September 21, 2022
These speculations reflect expectations of a general rate hike. DailyFX Chief Strategist John Kickleiter said: Note A 50bps rate hike would be bullish for the US benchmark stock market index.
Nonetheless, a 100 bps rate hike is very bearish for the S&P 500. This could be a problem for Bitcoin as well. Correlation with equities Consistently positive since December 2021.
US economy took a hit Two consecutive quarters of negative growthAdditionally, the manufacturing PMI shows the slowest growth in factory activity since July 2020. On the other hand, the 2-year US Treasury return has outperformed the 10-year US Treasury return and is shaping the yield curve.
Related: What’s next for Bitcoin and the crypto market now that the Ethereum merger is over?
These indicators are warning of an impending recession. But data show unemployment is at a record low and housing starts are still above his $1.35 million danger zone. Presented Charles Edwards, founder of Caprior Investments.
Recession warnings usually prompt the Fed to pivot. In other words, scale back or pause your hiking rate. But Edwards says the central bank won’t turn around because the U.S. economy isn’t technically in recession.
There is no reason to expect an immediate change in Fed policy here until major concerns of a recession show up, hitting a critical piece of employment, he wrote, adding:
So until we have evidence that inflation is contained, it is business as usual.
Most economists, or 44 of the 72 polled by Reuters, Predict The Federal Reserve has said it will raise interest rates by 75 basis points at its September meeting. Bitcoin could therefore avoid a deeper correction if it maintains its correlation with the S&P 500, based on Kickwriter’s outlook.
From a technical point of view, Bitcoin is Down to $14,000 In 2022, if it breaks below the current support level of around $18,800, triggering a head and shoulders collapse.
Conversely, a rebound from the $18,800 support could push BTC price up to $22,500 as a tentative upside target, or 16.5% above the Sept. 21 price.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investment and trading movements involve risk. You should do your own research when making a decision.
