Despite the fact that most market participants interpreted Latest Fed Policy Announcement more dovish than expected, hence the decline in the US dollar and US yields, Bitcoin Markets saw a “sell the fact” reaction, with BTC price falling sharply and long liquidations increasing.
B T c/USD was last changing hands in the mid-$27,000s, falling as low as $26,600 at one point, down about 2.2% over the past 24 hours according to CoinGecko.
According to crypto derivatives analytics website coinglass.com, approximately $60.2 million in Bitcoin Futures long positions were liquidated in the first two hours following the Fed’s policy announcement.
Long liquidations for the day were nearly $85 million, their highest level since 8th of March.
Fed Goes Ahead With Rate Hike, But Comes Out As Dovish
The Fed raised its benchmark interest rate range by 25 bps to 4.75-5.0%, as expected, but softened its language on the prospect of further hikes after acknowledging that the recent US bank troubles have weighed on the economic outlook. Added downside risk to the outlook.
Where it previously said that “ongoing increases” would be “appropriate”, it now says that “some” additional policy setting “may be appropriate”.
The Fed left its quantitative tightening schedule, which allows $95 billion in maturing assets to roll off its balance sheet each month, unchanged, noting that inflationary pressures have risen, up from a recent And a surprising acceptance in the wake of the inflation and jobs data surprise.
Finally, the average prediction from the Fed’s new dot plot showed the central bank ends up keeping interest rates at 5.1%, unchanged from the December dot plot and below consensus market expectations for 5.4%.
This, combined with the Fed’s change in language, appears to have been enough to encourage a softer reaction in the currency and bond markets. The US dollar index (DXY) was down 0.6% at a close of 102.50, while the US 2-year yield was down 23 bps back to less than 4.0%.
The US currency markets saw a marked change in their pricing this year with regard to the possibility of a move towards US interest rates.
According to CME’s Fed Watch tool, the probability of the Fed raising rates by 50-75 bps by the end of 2023 is now about 65% versus about 50% a day earlier.
Bitcoin Bulls Likely to Buy the Dip, $30,000 in Sight?
before the Fed meeting Bitcoin In the first session the price had reached a new high of $28,900, a nine-month high.
With the Fed meeting out of the way, a large number of traders are looking to take profits, leading some to label the “sell the fact” reaction to the dovish meeting.
Of course, Wednesday’s decline in US equity markets could also have weighed on crypto, despite the correlation between the two asset classes weakening substantially.
Shares slide as bank names slide after US Treasury Secretary Janet Yellen’s remarks Government not considering extending deposit insurance From the existing $250,000 per account to cover all deposits.
The comment may have sparked some fears among bank customers that their deposits (above $250,000) are not safe, increasing the risk of a bank run, which may explain the decline in bank shares.
But a resurgence of US bank stability fears on Wednesday is likely to attract bitcoin dip buyers.
Indeed, since the collapse of three US banks earlier this month, bitcoin has been acting as a safe haven against volatility in the traditional financial sector.
If the decline in US Bank stocks continues, it may not be long until BTC reaches $30,000 or even the next key resistance zone at $32,500-$33,000.
Given bitcoin’s traditional negative correlation with the US Dollar and US yields, declines in both these traditional assets also support a potential correction in bitcoin price to new multi-month highs.