As expected, the cryptocurrency market slowed its trading activity and began to consolidate near the $28k level. Bitcoin's trading activity also continues to decline, which is typical for intermediate periods between strong price movements.
Bitcoin is slowly but surely climbing resistance levels and consolidating on new highs. The key catalyst for the rise in the price of the asset in recent weeks is the crisis in the U.S. banking system and the need to inject liquidity into the economy.
Investors have exhausted the potential for an upward movement based on panic due to U.S. bank failures. However, today, March 22, the Fed holds its meeting, and the decisions made can radically change the further movement of the price of cryptocurrencies.
The Fed found themselves in a difficult situation, as, on the one hand, inflation remains high, at 6% on an annualized basis. At the same time, U.S. GDP shows slight growth while the labor market remains strong. The combination of these factors gives the agency every reason to continue monetary policy and withdraw liquidity from the economy.
On the other hand, a significant key rate hike led to $650 billion in unrealized losses in the banking sector. The Fed made a choice and announced emergency measures to inject $2 trillion into the U.S. banking system.
On the one hand, the fire has been put out, but on the other hand, the printing press has started, and it is likely that the inflation rate will begin to rise again in the coming months. With that in mind, the Fed should continue raising its key rate in March 2023.
And despite the fact that the markets are set to raise the rate by 0.25%, many leading experts expect the key rate to be reduced or maintain the current level in March.
For the first time in six months, the market does not express a unanimous opinion regarding the Fed's decision, which significantly increases the level of volatility. Leading analysts also agree that today's meeting will be the most unpredictable since 2003.
Bitcoin Price Movement Options
Bitcoin has been moving near the $27.5k–$28k range for the past few days without any strong impulse movements. The volatility of the asset has also declined amid an approaching storm. Given the non-obviousness of the results of today's Fed meeting, it is necessary to consider several options for the BTC price movement.
Also, the growing profit-taking sentiment at current levels from long-term holders is not encouraging, according to Glassnode data. Santiment analysts also report an increase in bearish sentiment towards BTC. Given this, the probability of price manipulation increases significantly.
A 25 bps key rate hike seems most likely, and as a consequence, an impulsive but short-term reaction of the BTC price. With a downward impulse, Bitcoin has every chance to drop to $26.6k.
With a bullish reaction, the asset will move to the $30k mark, but the strong zonal resistance of the bears will not allow BTC to realize a bullish impulse. Given this, we should expect the removal of the liquidity cascade for $30k and a further pullback of the asset to the $28k level.
If the rate stays at current levels or eases, the bullish momentum will become much stronger. With that in mind, we can expect a focused and powerful move of the BTC price to the $30.1k–$31.6k range.
Bitcoin has shown a powerful upward movement for two weeks and has consolidated above $28k. However, the asset approached a powerful resistance zone at $29k–$31k, where a long-term trading and accumulation took place. There is also a significant increase in profit-taking sentiment, which adds pressure on the price.
Given these factors, there is every reason to believe that Bitcoin will have the strength to make the final raid to $30k. However, the asset will later undergo a prolonged correction, consolidation and subsequent accumulation for an effective retest of $29k–$31k.