Bitcoin and the morning after Fed rate hike news

Yerevan (CoinChapter.com) — Bitcoin fell as the Federal Reserve blinked for the first time against the fears of rising inflation rates at the end of its monthly policy meeting that concluded on Wednesday.

Also read: Bitcoin week ahead Ep07: Let’s focus on the inflation-centric FOMC meeting

The flagship cryptocurrency slipped 4.51% to $38,351 after the US central bank’s new projections predicted sharper economic growth and higher inflation rise in 2021. A majority of officials voted in favor of keeping benchmark interest rates in the range of zero and 0.25%, where it has been since the start of the coronavirus pandemic in March 2020.

But…

…the biggest shocker for Bitcoin bulls came when Fed officials added that they would most probably hike rates by the end of 2023, withdrawing from their earlier commitments to sustain rates near zero until 2024. The one-year slashing came in the wake of higher-than-expected inflation readings on the latest consumer price index reports. In May, the CPI surged to 5%, the highest since 1992. In the previous month, it was 4.2%.

Also read: Bitcoin and dot plot—how BTC expects to react to Fed’s interest rate projections?

Bitcoin rose throughout 2020 and most of 2021 on expectations that investors would purchase the cryptocurrency to hedge against inflation. While there were success stories in Ruffer, Tesla, MicroStrategy, Square, and others, the Bitcoin price rally still stopped over fears of Elon Musk’s eerie influence on the cryptocurrency markets, regulatory hurdles, and environmental concerns.

Bitcoin downside pressure intact on profit-taking risks. Source: BTCUSD on TradingView.com

On Wednesday, Bitcoin merely gave up its gains to profit-takers who betted long on the cryptocurrency ahead of the Fed meeting. By that time, the cryptocurrency was up more than 30% after bottoming out at a local low of $31,013 on June 8. Before that, it had crashed by 52.21% from its record high of $64,899 from April 14.

Therefore, the direction of least risk in the Bitcoin market — for now — is to the downside.

“Overall,” noted analysts at LMAX Group, “the market is trending higher. But we’ll need to see a bit more push to the topside to suggest we’re out of a consolidation phase and ready to start thinking about a retest and break of the record high from earlier this year.”

What’s next for Bitcoin?

BTC/USD surged Thursday morning as traders assessed on the positive side of the Fed story: There won’t be rate hikes until 2023, which means inflation would run higher until then. That gives the pair plenty of time to adjust its medium-term bias as investors prepare for more CPI shocks.

Also read: Billionaire hedge fund manager backs Bitcoin as his inflation trade

Billionaire investor Paul Tudor Jones has already said that he would go all-in on the inflation rate after the Fed meeting, including a 5% allocation to Bitcoin.

“For me, it’s just a way of foundationally looking at how do I protect my wealth. Over time it’s a great diversifier. Again, I look at bitcoin as a store of wealth,” Jones added. “I look at crypto as a store of wealth. Others will argue this is a different ecosystem. It’s transactional in nature.”