Bitcoin dropped closer to a key support level and the Dow and the S&P 500 pulled back after the Federal Reserve moved forward its plan for 2 interest rate hikes in 2023.
Bitcoin (BTC) price extended its losses shortly after Federal Reserve Chair Jerome Powell announced that the Fed would move forward its timeline and schedule two interest rate hikes in 2023.
Bitcoin price was already seeing weakness in the early trading hours after losing the $40,000 level to mark an intra-day low at $38,300. The Dow and S&P 500 also pulled back 0.77% and 0.54% respectively.
Daily cryptocurrency market performance. Source: Coin360
The decision comes as economists worry about rising inflation in the United States and Powell said that the Fed had raised its inflation expectation from 2.4% to 3.4%. While Powell described the current inflation spike as “transitory”, consumer prices are at a 13 year high and analysts worry that rising inflation will impact the post-covid economic recovery.
Powell did not directly address whether, or when the Fed would begin tapering its $120 billion monthly bond purchases but the decision to begin raising rates in 2023 suggests that the program will see cuts way in advance of 2023 in order to be carried out in a moderate fashion.
Can Bitcoin price maintain its current range?
BTC/USDT daily chart. Source: TradingView
On June 15 Bitcoin price successfully completed its bullish inverse head and shoulders pattern (4-hour chart), but fell short of the $45,500 target after hitting resistance at $41,350.
While the price has slipped below $40,000 and failed to flip the level to support, analysts are viewing the current price action as nothing more than range-bound trading and at the time of writing, $38,300 looks like a lower support retest.
With less than 3 hours before the daily close, traders will likely look for BTC to hold above the 20-day moving average near the $37,000 level which is expected to function as support.
One thing to note is the steady inflow of BTC to major exchanges and an increase in miner outflows over the past few days as data from CryptoQuant suggests that Bitcoin inflows lead to bearish outcomes.
The 50- and 200-day moving averages are also enroute to converge, possibly forming a bearish ‘death cross’, but both are lagging indicators, meaning they are not entirely reflective of spot price action. Nevertheless, both moving averages could present considerable resistance for bulls.
A dip below the $37,000 to $36,000 range where many traders on crypto-Twitter have announced they have bids would likely take BTC price to the lower end of its current range in the $35,000 to $31,000 zone.