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Bitcoin price has moved sideways in recent days, tied solely to macroeconomic factors. The benchmark cryptocurrency was rejected north of $20,000 after “The Merge” and appears poised for volatility during today’s trading session.
At the time of writing, Bitcoin (BTC) is trading at $19,200 with sideways moves in the past 24 hours and a 5% loss in the past week. As the market moves past “The Merge”, crypto has returned to its correlation with global markets and the main factors driving price action: inflation and interest rates.
What to Expect for Bitcoin Price Ahead of the FOMC Meeting?
Later today, the US Federal Reserve (Fed) will hold its Federal Open Market Committee (FOMC) meeting, where it will announce its impending rate hike. As it has been for the past month, the crypto market is poised to see an uptick in volatility ahead of this big event.
Market participants appear to expect another 75 basis point gain after the latest release of the Consumer Price Index (CPI) and Non-Farm Payrolls (NFP) statistics. The results of these reports indicated continued core inflation in the US dollar, according to trading desk QCP Capital.
The company believes the market will look at today’s rate hikes, the Fed’s plan for the future of its monetary policy and its response to inflation. In that sense, the current FOMC will be critical for market participants to gain a deeper understanding of the Fed’s strategy. The trading desk wrote:
(…) we think the focus will be on the Dot plot. Markets will look for clear guidance on the expected number of increases for the last 3 FOMC meetings of 2022, as well as updated closing rates FOMC members are forecasting for next year.
Without “The Merge” acting as a bullish catalyst, and with Ethereum trading under a “sell the news” setup, Bitcoin price and the crypto market have flipped to extreme levels of fear. This sentiment seems to be the norm in all financial sectors.
As can be seen below, even gold shows a high correlation with risky assets, according to QCP Capital. The precious metal has underperformed in conditions where gold should be rising, with high inflation and a major arms conflict in Europe (Russia invades Ukraine).
Bitcoin price set for an aid rally?
Finally, QCP Capital believes that the Bitcoin price and the crypto market may see some relief. If the Fed stays within market expectations and announces a 75 basis point rate hike, cryptocurrencies and other asset risks could react to the positive effect.
As trading firm pointed out, every FOMC meeting in 2022 has led to a crypto relief rally, this time it seems poised to merge with historical data. QCP Capital added:
How long this rally will last, however, is another question. Will it be just a single day of short squeeze like in May and June? Or can we finally maintain positive momentum in the fourth quarter and the next CPI pivot in 3 weeks.