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As the US Fed steps in to control inflation, the Bitcoin market is likely to stay volatile. This could also be the beginning of Bitcoin’s long-term consolidation.
In order to control the soaring inflation, the US Federal Reserve announced a 75 basis points increase in the interest rate, the highest ever in 28 years. These unprecedented actions come as the US inflation hits a four-decade high. Just before the Fed announcement, Bitcoin faced another 20% crash moving closer to $20,000. But as the announcement was on the expected lines, Wall Street and the broader crypto market cheered later. As of press time, Bitcoin is trading 2.5% up at a price of $22,423 and a market cap of $428 billion.
Speaking at the press conference on Wednesday, Federal Reserve Chair Jerome Powell said:
“The current picture is plain to see. The labor market is extremely tight, and inflation is much too high”.
Powell further added that the US central bank will not declare “victory” until it has strong evidence that inflation is coming down. This means that if inflation remains high for the month of June, we can expect another rate hike for the next month. The central bank said:
“In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals”.
The US unemployment claims have soared past the expected number last month which could be another reason for the Fed to worry.
How’s Bitcoin and Crypto Placed?
Bitcoin and the broader crypto market have seen enough pain after the US released its inflation last Friday. Even before the latest announcement from the Fed, over the last week, Bitcoin has already corrected 25% while the broader crypto market has slipped under the $1 trillion mark.
Microstrategy CEO Michael Saylor said that the company has back-tested every Bitcoin strategy. Saylor believes that now could be a good entry point for Bitcoin. “Nobody had ever lost money after investing in Bitcoin for four years. The simple moving average of BTC over four years is $21,685,” said he.
But it would be too early to say anything. Let’s see if sellers’ fatigue comes in finally or if they get even more aggressive. In the first case, we could be entering a multi-month consolidation phase. Popular market analyst Rekt Capital believes the BTC consolidation could extend till December 2022.
— Rekt Capital (@rektcapital) June 15, 2022
Just to get an overview of the next Bitcoin bottom, the analyst also presents a wonderful analogy. “If BTC repeats history & bottoms 517-547 days pre-Halving 2024 then BTC would bottom in Oct/Nov ’22 But $BTC has dropped so much lately that it’s difficult to think the bottom won’t be in sooner How could we get a Q4 2022 bottom? Slow-bleed, some relief, lots of consolidation,” noted Rekt Capital.