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Crypto markets have been experiencing difficult times as the Federal Reserve tightens its monetary policy. The Fed has overshadowed all the good news. This is quite normal as investors turn to more secure investment options as access to liquidity becomes difficult. This has resulted in selling due to indifference towards risk markets, including cryptocurrencies.
Bitcoin Price Performance
The increase in interest rates and the transition to a tighter monetary policy triggered an inevitable scenario for risk markets. The shift of institutional investors towards safer products such as treasury bonds has negatively affected risk markets, including cryptocurrencies. Just as the influx of money into the market during the pandemic triggered a rise, we have been experiencing the opposite for the past two years. The unique problems of cryptocurrencies have certainly played a significant role in increasing losses. However, this will come to an end at some point and the Fed will start lowering interest rates again.
Fed does not provide a clear projection for the beginning of the interest rate cut process, contrary to popular belief. A balanced transition process (commonly referred to as a soft landing) is preferred as it could negatively impact bond yields. We will see that the Fed starts cutting rates once the rise in inflation stops and the current policy succeeds, and shortly after that, cryptocurrencies will likely return to their former glorious days.
Crypto Expert’s Commentary
A popular analyst known by the pseudonym Credible Crypto says that Bitcoin‘s relative strength index (RSI) shows a classic bullish divergence on the daily chart and a hidden bullish divergence on the weekly chart. In technical analysis, a classic bullish divergence is typically seen as a reversal signal, while a hidden bullish divergence is an indication that the trend continues.
“The largest liquidation event since December ’21 (yes, almost two years ago), twice the collapse of FTX.
Classic bullish divergence on BTC daily and hidden bullish divergence on BTC weekly (both charts show them).
Bitcoin dominance is testing the upside break of a two-year long-range. Despite the absence of a real break in the bullish market structure to give any change signal in momentum, extravagant targets like $20,000 and $12,000 are given. No, the first breakout point is $24,800 and this should be monitored.”
Credible Crypto states that Bitcoin has been consolidating at low levels for a while before triggering a steep fluctuation this year.
