With no clear indication of a directional bias, the price of bitcoin is consolidating. Ethereum and other altcoins have lost some of their volatility as a result of this poor performance. But there will probably be volatility because the US Federal Reserve (Fed) issued its monetary policy decision.
The Federal Reserve’s base interest rate is now hanging around 2.5%, but following the policy meeting, it is anticipated that the US central bank will increase it by 75 basis points to 3.25% in order to combat increasing inflation. According to popular theory, this story may cause short-term liquidity runs on both sides but ultimately start an upswing.
If, instead of a 75 bps hike, the Fed decides to hike by 100 bps, pushing up the base interest rate to 3.5% – as is possible – it could cause markets to crash. Therefore, investors should pay close attention to the announcement and wait for the post-meet speech from Jerome Powell, the acting chairman of the Federal Reserve, for possible hints of future policy.
Regardless, patience is truly a virtue before events like this, so investors should exercise it.
Bitcoin price bore market participants
Bitcoin price has already collected the sell-stop liquidity resting below the previous weekly lows at $18,500, and seems ready for a recovery. However, as mentioned above, the FOMC meeting could play a pivotal role in determining where the markets move next.
Due to the massive sell-off over the past few weeks it may be the case that markets have already priced in – and probably overshot – the base case scenario of a 75 bps hike, so once the news actually hits the wires there may be a rebalancing reaction. Such an outcome could trigger a run-up in stock and crypto markets.
In this case, investors should provide BTC room to move down temporarily to the June 18 swing low at $17,593.A sweep of this level could catalyze a reversal, however, pushing BTC to the immediate hurdle at $19,539 and $20,737. Beyond these levels, BTC could even attempt to revisit $22,575 and set a double top.
On the other hand, if the Fed delivers a more hawkish message or raises rates by 100 bps it could lead the BTC price to fall. If Bitcoin price breaches below and then flips the $18,293 support level into a resistance barrier, it will invalidate the bullish outlook and trigger a crash to $15,550.
Ethereum price ready to recover losses
Ethereum price seems to be hovering in a descending parallel channel after creating three lower lows and two lower highs since August 4. While ETH currently hovers above a stable support floor at $1,280, there is a chance of further decline.
A sell-off in Bitcoin price could knock Ethereum price to fill the imbalance, aka Fair Value Gap (FVG), at $1,234. However, a resurgence of buyers followed by a reversal in the big crypto post the Federal Open Market Committee (FOMC) meeting could trigger a run-up.
Such a development could see ETH reach the immediate resistance level at $1,550. A successful flip of this level will put the recently shifted Proof-of-Stake token against the high time-frame resistance level at $1,730.
Although things are looking temporarily indecisive due to the still-unknown interest rate hike, Bitcoin price and its reaction to the FOMC meeting could play a crucial role in determining the directional bias. If Ethereum price produces a daily candlestick close below $1,280, it will invalidate the bullish outlook and potentially crash to $1,080.
