Bitcoin experienced a remarkable 8% surge recently, only a week after its daily price chart displayed an unsettling “death cross” formation. Interestingly, this surge aligns with the growing expectations of U.S. rates traders that the Federal Reserve will maintain unchanged interest rates not only for this week but for the rest of the year.
The world’s leading cryptocurrency by market value has reached $27,220, its highest level since August 31. This impressive rally follows the appearance of the bearish “death cross” pattern, which involves the 50-day simple moving average crossing below the 200-day moving average.
The recent rise of Bitcoin raises doubts about the reliability of the death cross as a sole indicator. Nevertheless, investors closely track the cryptocurrency’s performance to assess the Federal Reserve’s next steps.
However, the rally aligns with the increasing expectations among U.S. rate traders. They anticipate the Federal Reserve will maintain its current borrowing costs throughout the year.
Bitcoin’s strong performance amidst the death cross has challenged traditional technical analysis, surprising experts. Currently, investors eagerly await the Federal Reserve’s upcoming announcement on interest rates, scheduled for this week.
Fed funds futures indicate a 99% probability that the central bank will maintain rates between 5.25% and 5.5%. Additionally, there is a 69% likelihood of no rate action in November and a 58% probability of the same in December.
The Federal Reserve has taken decisive action against inflation since March 2022, aggressively raising rates by 525 basis points. Many experts attribute this move to the decline experienced in the crypto market over the past year.
The Federal Reserve’s Cautious Approach & Its Impact On Bitcoin Surge
Market experts anticipate that the upcoming Federal Reserve meeting will concentrate on forward guidance, macroeconomic projections, and statements from Fed Chair Jerome Powell. Considering market dynamics, the central bank is expected to approach its future rate hike plans cautiously.
Scotiabank highlights that the dot plot, which provides estimates for interest rates, will likely indicate the possibility of one more rate hike- before the year’s end. Its cautious approach considers potential inflation rebounds and market responses to perceived signals of easing.
Analysts at ING suggest that the Federal Reserve may not implement the projected final increase in interest rates. The recent surge in Bitcoin could be attributed to the belief that the Fed’s tightening phase is approaching its conclusion. Its cryptocurrency remains incredibly responsive to shifts in expectations regarding interest rates, making it an unparalleled gauge of market sentiment.
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According to ING, a significant concern might arise if the Federal Reserve were to decrease its dot plot median forecast by 100 basis points, signaling a potential easing cycle in 2024. Such a development holds implications for both the Bitcoin market and the broader financial landscape, given investors’ keen observation of central bank actions amid an uncertain economic environment.
“The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.”
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