The FOMC meeting was concluded on Wednesday and the Fed had finally made its decision public. As expected, there was another interest rate hike but surprisingly, the crypto market did not respond as expected. Instead of wild volatility, digital assets in the space were able to hold on to their gains for last week, sparking speculation on if the reason was the market had reached its bottom.
Bitcoin Responds To Fed Rate Hike
The refusal of the crypto market to dump following another high-interest rate hike points to more strength in the market. Naturally, cryptocurrencies such as Bitcoin which are risk assets are susceptible to a decline in price with such tightening from the Fed, and given that this makes the fourth consecutive 75 BPS hike, a larger dump was expected.
Instead, bitcoin has been able to maintain its position above $20,000 and continues to follow a bullish trend at this time. There are factors that have made sure of this show of strength by the cryptocurrency. All of which are pointing to further upside in the market.
An example is the accumulation that has been going on in the market so far. Bitcoin investors, large and small, have been hoarding BTC in the last two weeks. This has seen the digital asset form much-needed support at $20,000. Historically, once bitcoin has hit its bottom, it deviates from established trends such as high market volatility following an FOMC meeting. This could point towards a bottom for the digital asset.
BTC maintains above $20,000 | Source: BTCUSD on TradingView.com
Another explanation for this could be the forecast that the Fed will finally start easing up on its stance to tackle inflation. Despite inflation rates still remaining above 8%, the interest rate hikes are expected to reach a natural end in the next few months.
Once this reduction in interest rates begins, there will be a move into bitcoin, which would also signal that the bottom is close, if it has not already been reached. Expectations are that bitcoin will not go below its current cycle low of $17,600.
The decline in the dollar that followed the FOMC meeting could also point toward a bottom. A weakening of the dollar will see investors flock to assets such as bitcoin to serve as a hedge and protection for their purchasing power. Once this point is reached, it will likely be the start of another bull market.
Featured image from The Economic Times, chart from TradingView.com
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