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21.03.2023 06:36 PM
Fed cancels its own efforts to raise rates

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The price of the bitcoin cryptocurrency has increased over the last few days and is currently at the $29,000 level. The flat on the 24-hour TF can now be viewed as having been reached, allowing the cryptocurrency to rise further. We have repeatedly stated in recent weeks and months that we are anticipating a drop in the price of bitcoin to $15,000, but we have also made it clear that if the underlying background changes, things could turn out differently. They also said that no one had canceled technical indications and that you didn't have to wait impatiently for bitcoin to fall if there were any. Thus, we received both. The fundamental background of bitcoin changed in its favor as strong buy signs started to appear. The fact that the Fed purchased $300 billion worth of bonds last week, perhaps to combat the banking crisis, means that this change was far from evident.

What then do we have as a result? Long-term rate increases by the Fed have been accompanied by a QT program (quantitative tightening), which is manifested in the sale of securities from its balance sheet. In actuality, this signifies the withdrawal of excess money from the economy, which naturally lowers inflation. As a result, the Fed's key rate hike was not the sole factor contributing to the decrease in inflation in the United States over the past six months. The QT program and the decline in energy prices were both successful. Nevertheless, last week, when news of the simultaneous failure of three big American banks spread, the Fed began to purchase bonds worth $300 billion, thereby launching a new program of "quantitative easing" to boost the economy. Since there is more money flowing through the economy once again, inflation may once again start to slow down or even stop decreasing. There is also more money, and it needs to be moved somewhere so that it doesn't lose value. One of the potential choices is the market for cryptocurrencies. Remember that the most recent upward trend occurred in practically all nations of the world right when "quantitative stimulation" was being promoted. So, the situation we witness today is the same. And bitcoin can continue increasing if the Fed resumes injecting money into the economy. Of course, we do not anticipate it increasing to $40,000 or $50,000 any time soon, but everything is possible. Bitcoin is still a risky and "impulsive" way to invest.

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Bitcoin has now reached the critical level of $25,211 in the 24-hour time frame, allowing traders to start making purchases. They can now be held with a $29,750 target. Since the instrument should at least partially adapt after an increase of another 30%, a rebound from this level (sales) is possible. Beyond $29,750, we start new purchases or pause existing ones with a target of $34,267.

Paolo Greco,
Analytical expert of InstaForex
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