Bitcoin falters as traders contemplate the FOMC meeting's 25 basis point rate hike

Bitcoin (BTC) and the wider markets were trading in volatility across Wednesday before engaging a deep selloff gear as Fed's key rates decision approached. Industry pundits anticipated that Bitcoin price would deliver a short-lived upward correction before the Federal Open Market Committee (FOMC) meeting. This would be followed by a stark decline after the interest rate announcement amid anticipated increased strength of the USD. As a result, Bitcoin investors and traders were on high alert.

Also Read: Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Will FOMC end BTC's 2023 bull rally?

FOMC announcement, 0.25% rate hike with no decision to pause

US Fed chair, Jerome Powell, and other committee members of the Federal Reserve delivered a quarter-point (0.25%) hike in key rates on Wednesday, May 3. However, they have signaled a pause in what has been the fastest-tightening campaign since the 1980s.

The decision, which comes amid imploding traditional financial institutions in the US, brings the policy rate to a new range of 5-5.25% and marks the highest level since June 2006. Notably, it aligns with the official interest rate projections released after their March policy meeting, which was the same as in December.

FOMC is committed to closely monitoring incoming data and assessing the implications for monetary policy. This will help determine the extent to which more policy firming could be appropriate to return inflation to 2% over time. In this regard, the committee "will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

An area of interest, however, is the official's change of language in their statement from the last meeting, that,  

The committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive.

On the other hand, despite a decrease, inflation still persists well above the 2% target set by the Fed, and the Central Bank remains in the fight against it.. While many thought the series of bank collapses would cause officials to reconsider raising rates as high as previously thought, the Fed has resounded that the US banking system is sound and resilient.

Bitcoin price reacts to Powell's "No decision on a pause"

Notably, the decision to pause rate hikes was not made today, with Powell saying during the press conference, "The Fed is prepared to contain inflation." Bitcoin has pulled back modestly to $28,360 versus $28,600 just before the FOMC rate decision.

As expected, the 25 basis point increase from the FOMC meeting has not had much impact on the crypto market. There has not been any significant drop in the Bitcoin price. Nonetheless, some volatility can be seen, as is characteristic of FOMC announcements. Bitcoin price dipped by more than 1% to perform near $28,300, while Ethereum (ETH) slipped by 0.5% to around $1,852 after the FOMC meeting. Global crypto markets dipped by 0.89% to $1.17 trillion on CoinMarketCap. Similarly, the volumes plummeted by 4.32% to $35.13 billion currently.

Bitcoin currently faces support at $28,156, with resistance at $28,881. At press time, BTC was trading at $28,354, down by 1.25% in the last 24 hours. In the one-hour timeframe, Bitcoin price seems bullish, with a green candlestick developing. The Relative Strength Index (RSI) backs the bullish thesis, tipping upward with only an inch into the positive territory.

Following the FOMC announcement, the Parabolic SAR turned bullish and indicated a positive trend. This also favors the upside.

BTC/USDT 1-hour chart

On the other hand, if selling pressure increases relative to buyer momentum, Bitcoin price could drop below the immediate support at $28,156.