Key Takeaways:
- Bitcoin prices spiked after FOMC announced a 0.25% hike in interest rates.
- However, the token failed to hold above $41,000 as the dollar grew stronger.
- BTC's 20-day, 50-day and 200-day EMA are still putting pressure on the token.
NEW DELHI (CoinChapter.com) — Bitcoin (BTC) prices spiked to move above $41,000 on Mar. 16 following Federal Open Market Committee’s (FOMC) decision to hike interest rates by 25 basis points (0.25%).
However, BTC prices remained relatively flat following Wednesday’s hike, owing to bears moving to book profits. As a result, the pioneer cryptocurrency has moved in a narrow price band between $40,000 to $41,000.
Bearish pressure mounts on the digital asset since the Federal Reserve’s proposed rate hike is unlikely to dent the rising inflationary pressure significantly. In detail, the rate hike is part of the U.S. central bank’s efforts to pare back pandemic stimulus.
The move would correspond with a hike in the prime rate higher financing costs for several consumer borrowing and credit services. FOMC also penciled in increases at each of the remaining six meetings this year, along with the rate hikes.
The committee last raised rates in Dec 2019. Aggressively rising inflation forced the Fed to announce a likelihood of more than five rate hikes in 2022. As a result of the announcement, traditional markets crashed, with Bitcoin and the crypto markets following suit.
In addition, the Russia-Ukraine tensions have also affected the prices of oil. Russia ranks third globally in oil production, accounting for nearly 12% of the global oil production. However, with the economic and trade sanctions on the country, the oil supply has declined.
Also Read: Bitcoin’s on-chain demand returns as BTC wobbles around $40K.
Furthermore, the UAE went back on its assurances that it would encourage fellow OPEC members to boost their production above their agreed quotas. As a result, oil prices are likely to increase, further driving inflation across other sectors.
Strengthening Dollar Might Dampen Bitcoin’s Price Prospects
Although Bitcoin has been touted as an independent asset class that does not correlate with the traditional asset classes and economic cycles, its recent price action has been contrary to its moniker of ‘digital gold.’
In addition, several analysts highlight the inverse correlation between the U.S. dollar and Bitcoin. Max Keiser, a bitcoin pioneer, and a Wall Street analyst, first pointed out the correlation.
Historically, when the U.S Dollar rises, Bitcoin prices tend to fall, though there have been rare occasions where the dollar and BTC shared a positive correlation.
Hence, if historical trends hold, BTC prices would likely fall with the dollar strengthening.
BTC Price Chart
BTC bulls and bears are aggressively participating in the market, as the long wicks on both ends of Thursday’s candles show. Bears moved in as soon as Bitcoin went north of $41,000, pushing BTC below the $41,000 price mark.
Also Read: 3 reasons why Bitcoin bulls should wait for a dip toward $30K to buy BTC.
Bitcoin’s 100-day exponential moving average (violet wave, 100-day EMA) and 200-day EMA (green wave) trendlines are acting as resistance for the digital asset. However, BTC would need to consolidate above $41,000 before trying to flip immediate resistance near $42,000.
A move above immediate resistance would see BTC target resistance from its 100-day EMA near $42,970. Finally, a sustained uptrend could lead Bitcoin to challenge resistance near $44,700 before market corrections pare prices.
Conversely, if BTC prices fail to start an uptrend, bulls would try to hold Bitcoin above $40,000 support, failing which the support at $38,800 would come into play. A sustained sell-off could see BTC fall to $37,900 before recovering.
Meanwhile, the relative strength index for BTC is neutral, clocking 53.05 on the daily charts. In detail, the RSI measures the magnitude of recent price changes to analyze overbought or oversold conditions.
With the mid and long-term EMA trendlines acting as resistance, Bitcoin would need some very strong bullish tailwinds to move near $44,000 and avoid further downside movement.
At the time of writing, BTC was trading at $40,785, down 0.85% on the day.
