Given the slight price uptick before the FOMC announcement, some analysts believe this is the time to buy the dip as a Bitcoin rally is imminent.
The price of Bitcoin tested the $18,000 mark for the first time since November 8 before retracing below $17,000. It was the first time since the FTX collapse that the asset traded above $18,000.
Following a rather dour year for cryptocurrencies, Bitcoin and other crypto assets were beginning to rally in early November before the FTX news broke. At that time, Bitcoin was trading at $21,000 with an uptrend in view.
When FTX crashed on November 8, it affected crypto companies like BlockFi, Genesis Capital, and the Digital Currency Group. The event hurt investor confidence in an already struggling market and caused further market volatility as prices hurtled downwards. Bitcoin price hit its lowest in two years following the news and the market has not been quick to recover since then.
It wasn’t just Bitcoin that showed a slight recovery. Second-largest asset, Ethereum, also made a comeback. It showed a 5% increase and traded briefly at $1335. However, the price recovery was short-lived.
FOMC Report Drags Down Bitcoin Price Again
Following the FOMC report and the comments of Jerome Powell, the Fed chair, Bitcoin’s slight rally ended. With the recent 50 basis point hike, the December 13 CPI index showed inflation of just 7.1%, allowing many traders to believe the Feds would ease their hawkish stance.
However, Powell noted that the plan is to reach an inflation rate of 2%. He said, “We may see higher rates for a longer period to achieve the 2% inflation goal.” Likewise, the FOMC members agreed that interest rate hikes should continue in 2023. With interest rates set to rise further, it stands to reason that investors will pull the plug on riskier assets like Bitcoin, sparking short-term volatility.
The downtrend also emphasizes the continued correlation of Bitcoin price to the equities market as it has been all year. As Clara Medalie, Research director at Kaiko noted earlier in the year, “Crypto is highly correlated to equities, so if equity markets were to turn around, this would likely have a bullish effect on crypto.”
Time to Buy the Dip?
Given the slight price uptick before the FOMC announcement, some analysts believe this is the time to buy the dip as a Bitcoin rally is imminent. The next few days will be decisive to see if Bitcoin’s macro trend has changed and if a rally is in the works.