Bearish View
- Sell the BTC/USD pair and set a take-profit at 34,000.
- Add a stop-loss at 38,000.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 37,000 and a take-profit at 39,000.
- Add a stop-loss at 35,000.
The BTC/USD pair retreated in the overnight session as investors reflected on the latest Federal Reserve interest rate decision. The pair is trading at 36,176, which is slightly lower than Wednesday’s high of over 39,000.
Fed Interest Rate Decision
Bitcoin is often seen as a high-risk asset because of its volatility and the overall lack of utility value. Therefore, the coin tends to do well in a period when interest rates are low. For example, the coin jumped from less than $10,000 in 2020 to almost $70,000 in 2021 as the Fed embraced its most expansionary policies ever.
The monetary policy framework is changing as the Federal Reserve attempts to reduce the rising inflation. On Wednesday, the bank decided to leave interest rates unchanged at the range of between 0% and 0.25%. The bank also decided to slash its asset purchases program. It intends to end this policy in March.
At the same time, the bank hinted that it will start hiking interest rates in March considering that the economy is doing well. Analysts expect that the bank will deliver about 3 to four rate hikes this year.
The BTC/USD pair rose initially after the Fed made its decision. But it then quickly erased these gains as Jerome Powell held his first press conference of the year. The catalyst for the sell-off was the fact that Powell did not rule out an aggressive hiking policy if inflation remained at elevated levels.
The BTC/USD sell-off coincided with the sell-off in stocks. For example, futures tied to the Nasdaq 100 index declined by over 180 points while those linked to the Dow Jones and S&P 500 index fell by more than 1%.
BTC/USD Forecast
The four-hour chart shows that the BTC/USD pair has been in an overall bearish trend. The pair crashed to a low of 33,000 during the weekend. This was the lowest level the pair has been since July last year. The price was also lower by more than 50% from its highest level last year.
The pair managed to stage a comeback earlier this week ahead of the Fed decision. It is slightly below the 25-day and 50-day moving averages while the MACD has moved below the neutral level.
Therefore, the pair will likely retreat slightly today and then bounce back during the weekend as investors embrace the new normal.
