Bullish View
- Set a buy-stop at 40,000.
- Add a take-profit at 43,000 and a stop-loss at 38,000.
- Timeline: 2 days.
Bearish View
- Set a sell-stop at 37,500.
- Add a take-profit at 35,000 and a stop-loss at 39,000.
The BTC/USD retreated after the hawkish Federal Reserve interest rate decision. The pair fell by more than $1,000 and is trading at $38,800, bringing its total market capitalization to more than $796 billion.
Bitcoin and Interest Rates
The financial market reacted significantly after the latest Fed interest rate decision. The bank left interest rates unchanged at a record low of between 0% and 0.25% where they have been since the pandemic started. It also left its giant quantitative easing policy intact, for now.
In the accompanying statement, the Fed said that the American economy was staging a stronger recovery than expected. It also said that members started to deliberate about coming out of the easy-money environment. Most FOMC members signaled that the first rate hike will come out in 2022. The members also started deliberating on ending the bond-purchase program.
The Fed decision was important for Bitcoin. For one, the recent rally has been attributed to the policies by the Fed. By lowering interest rates, the bank incentivized investors to start investing in risky assets like cryptocurrencies and technology companies. As such, the logic says, the reversal will happen when the bank starts tightening.
However, there is a possibility that the dollar will retreat while the BTC price will bounce back in a tightening environment. This is because, as it did before, the Fed will likely raise interest rates gradually. Also, this tightening will happen at a time when the economy is recovering, meaning that people will still have the funds to invest. Further, yields in safe assets like bonds will remain low.
Bitcoin Price Analysis
The four-hour chart shows that the BTC/USD has found strong resistance at the 40,000 level. It has struggled moving above this level several times in the past month. Indeed, the price failed to move above it this week after the bullish statements by Elon Musk and Paul Tudor Jones. The pair has also formed an inverted head and shoulders pattern, whose neckline is at 40,000.
It is also at the same level as the 25-day and 15-day exponential moving averages. Therefore, the pair will likely bounce back now that the Fed has confirmed that it is thinking about tightening. This will be confirmed if the pair manages to move above the 40,000 resistance level.
