The imminent “death cross” could put the Bitcoin bull market in danger ahead of the Fed meeting


Bitcoin (Bitcoin) Was fluctuating around $40,000 as investors waited for the Fed to release new economic forecasts on Wednesday.

The market’s focus shifted to two important questions: Will US central bank officials express their intention to raise interest rates in 2023 instead of 2024? How much do they think the inflation rate will rise for the rest of 2021 and next year?

loose the temper

In March, the Fed’s last forecast showed that 11 Federal Open Market Committee (FOMC) officials agreed to keep interest rates close to zero until at least 2023. This indicates that the Fed will tighten monetary policy in 2024. This also means that the Fed may cut its interest rates. The $120 billion asset purchase plan is ahead of schedule.

“ProspectsGradually lose your temperIn the medium term, due to the latest consumer price index (CPI) readings, the Fed’s preferred measure of inflation has also increased. CPI data in April showed that inflation rose to 4.2%. At the same time, it rose to 5% in May. This was 1992. For the first time since.

Nonetheless, the Fed called them “temporary,” thereby attacking the dramatic inflation spike. The central bank has promised to wait until the inflation rate remains near a relatively high level before announcing a rate cut. Wednesday’s forecast will indicate that officials will wait for the next reduction in time.

Faster growth and inflation prospects make interest rate hikes in 2023 more likely.Source: Bloomberg

David Tawil, president of ProChain Capital, a New York-based multi-strategy crypto asset fund, believes that after Wednesday’s FOMC meeting, the Fed’s sentiment to keep its expansionary policy unchanged will change.

“As always, the Fed’s post-meeting statement will [be] The analyst analyzes it carefully,” he told Cointelegraph.

“However, even according to the most conservative interpretation, the Fed may tilt towards low unemployment and economic growth and indicate that it will gradually reduce bond purchases and raise interest rates.”

Bitcoin outlook is bullish

The interest rate hike forecast makes it take at least two years for Bitcoin to continue its anti-inflation bull market.

After the global market crash in March 2020, the benchmark cryptocurrency became a star performer, mainly due to concerns about the Federal Reserve’s quantitative easing policy and Trillions of U.S. government stimulus aid For Americans, this will weaken investor interest in government bonds and the U.S. dollar.

The BTC/USD exchange rate jumped from the lowest point of 3,858 U.S. dollars in mid-March 2020 to 64,898 U.S. dollars in April 2021, an increase of 1,582%. At the same time, the yield on the benchmark 10-year US Treasury bond soared from 0.36% in March 2020 to 1.774% in March 2021. The yield is inversely proportional to bond prices.

The U.S. dollar index, which measures the strength of the U.S. dollar against a basket of major foreign currencies, plummeted 9.48% over the same period. Due to the strong economic forecast of the United States after the reopening, the bond market and the US dollar have rebounded recently.

At the same time, Bitcoin has fallen by more than 25%, partly due to Elon Musk’s anti-Bitcoin tweets and regulatory FUD.

Bitcoin (orange), U.S. dollar index (blue) and performance of 10-year Treasury bond yields in 2020 and 2021. Source: TradingView.com

Nick Spanos, the founder of the Bitcoin Center in New York, pointed out that rising inflation and the Fed’s efforts to maintain interest rates near the current 0.25% provide ample opportunity for Bitcoin to resume the bull market.

This is also because other traditional safe-haven assets, such as government bonds, provide historically low yields. At the same time, Bitcoin is expected to achieve a higher growth rate.

Spanos said:

“After releasing the Fed’s dot chart today, I saw a temporary reaction in the cryptocurrency market and the price of Bitcoin soared. Based on this fundamental, it is more likely to retest the $45,000 level in the next few days.

Tawil also raised a bullish outlook for Bitcoin, noting that investors will continue to view this cryptocurrency as their “safe haven” against higher inflation.

“If legislative critics and celebrities can shut up on Bitcoin (which they may not be able to do), then Bitcoin may rise to $75,000 by the end of the year,” he said.

The death cross is imminent

The technical settings on the Bitcoin chart disagree with bullish analysts.

For example, the BTC/USD exchange rate recently encountered Higher selling pressure in the $40,000-42,000 rangeAs a result, traders worry about seeing this area as a clue to short-term profits and risk falling to the next support level (approximately 35,000 USD, 32,000 USD, and 30,000 USD).

At the same time, Bitcoin’s 50-day simple moving average (50-day SMA; blue wave) implies that the closing price is below its 200-day simple moving average (200-day SMA; saffron wave). The crossover is called a death crossover-an indicator notorious for predicting an early price drop in financial markets.

Bitcoin hints that the bearish fear of death crosses continues. Source: BTCUSD on TradingView.com

“Whenever a death cross occurs, Bitcoin It has experienced a deeper downside,” noted Rekt Capital, a pseudonymized market analyst. “In 2014, Death Cross fell -71%. In 2017, it was down -65%. [And], In 2019, an additional decrease of -55%. “

related: This is how Bitcoin’s upcoming death cross became a contrarian buy signal

trader Add to The death cross is still a prediction, not a scenario, suggesting that the price of Bitcoin may rebound, despite the appearance of a bearish indicator in the following trading day.