- The US Federal Reserve is expected to increase its funding rate by a quarter point to 5% on Wednesday.
- Bitcoin and Ethereum prices are holding steady after posting recent gains in the past week, anticipating a moderate interest rate hike.
- Experts argue that the fear of inflation and bank runs are driving investors’ flight to Bitcoin, fueling the cryptocurrency’s price rally.
The US Federal Reserve is expected to raise interest rates while facing the tough task of tackling the banking crisis. Economists expect the central bank to increase its target rate range to 4.75% -5%, although there is a debate as some believe the Fed will not raise its rates at all.
Bitcoin price rally steadied above the $28,000 level after yielding nearly 15% gains over the past week. BTC’s run up to $30,000 depends on market participants’ reaction to the Fed rate hike and FOMC meeting.
Also read: Will Asian investors gobsmacked by $17 billion Credit Suisse bond wipeout turn to altcoins?
The US Fed plots its next interest rate move while the financial market is in turmoil
The US Federal Reserve is scheduled to release its rate decision along with its new economic projections at 18:00 GMT on Wednesday, March 22. Fed chair Jerome Powell will speak at 18:30 GMT. As of March 22, there is an 89.3% chance of a quarter-point increase by the central bank, according to the CME Group’s FedWatch tool.
CME Fedwatch Tool
The tool shows a 10.7% probability there will be no hike and Fed chair Jerome Powell may start to ease his easing campaign amid fears of emerging financial contagion.
Wednesday’s rate hike decision is tougher given the recent collapse of two large US banks and the financial market turmoil.
Banking crisis, Bitcoin “safe haven” narrative and rally to $28,000
In light of the US banking crisis and the global financial crisis, experts believe Gold and Bitcoin are the assets that gained relevance. Interestingly, as BTC fell out of its correlation with US tech stocks and equities, its correlation with Gold increased.
Bitcoin-Gold correlation increases to 84% as of March 20
According to a recent report from CoinShares, inflows of capital to Bitcoin are negative for the sixth consecutive week. Yet despite the decline in capital inflow, BTC price rallied above the $28,000 level and steadied, ahead of the Fed’s rate hike decision.
Ethereum is exchanging hands at the $1,800 level ahead of ETH token unlock, as investors price in a quarter percentage point hike.
How will Bitcoin react to an above or below-expectation rate hike announcement?
While Bitcoin’s “safe haven” narrative has made a comeback and long-term holders sit on unrealized profits, the asset’s run-up to the $30,000 level could be quashed by a higher-than-quarter-point hike.
Bitcoin, like other risk assets, benefits from looser monetary policy and the availability of liquidity in the economy. BTC could also garner attention from investors looking to move away from centralized trust institutions like banks, after the recent collapses. This is why not raising interest rates as expected or strong indications in the FOMC statement that the monetary policy will ease in light of the banking crisis would further damage the confidence in the financial system.
Therefore, if the central bank does not hike at all or Powell’s stance turns dovish in light of the US banking crisis and global financial market turmoil, Bitcoin and risk assets could rejoice. BTC price rally could gather bullish momentum to hit its $30,000 target in the ongoing uptrend.
Bitcoin price: Key levels to watch out
Bitcoin price is in an uptrend that started in January 2023. As seen in the Bitcoin/TetherUS 1D price chart below, BTC price rallied with two bull flag formations in early January. The pattern appears to have repeated itself in the price rally that kicked off on March 12, with the US Federal Reserve’s announcement of the Bank Term Funding Program (BTFP).
The US central bank’s recent announcements have fueled the asset’s uptrend, since they fall in line with injecting liquidity in the economy. Wednesday’s rate hike announcement is therefore key and BTC holders will closely watch Powell’s speech to ascertain whether to expect further quantitative tightening measures or expect easing.
BTC/USDT 1D price chart
Bitcoin price is currently battling resistance close to the 38.2% Fibonacci Retracement level at $28,182. A clean break above the resistance clears BTC’s path to the next resistance at the 50% Fibonacci Retracement of the previous bear market decline at $31,651. In the current uptrend, the bullish target is a close above the $31,000 level.
If Powell’s speech reveals the Fed’s hawkishness and expectation of higher rate hikes for longer, a knee-jerk reaction could send Bitcoin reeling to its support at $26,589 before subsequent drop to key support at $23,944 and lower.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Is Altcoin Season here as Bitcoin reaches a new all-time high?
Bitcoin reaches a new all-time high of $98,384 on Thursday, with altcoins following the suit. Reports highlight that the recent surge in altcoins was fueled by the victory of crypto-friendly candidate Donal Trump in the US presidential election.
Shanghai court confirms legal recognition of crypto ownership
A Shanghai court has confirmed that owning digital assets, including Bitcoin, is legal under Chinese law. Judge Sun Jie of the Shanghai Songjiang People’s Court shared this opinion through the WeChat account of the Shanghai High People’s Court.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: New high of $100K or correction to $78K?
Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.