- Monetary conditions have tightened and cryptocurrencies have recovered from the drawdown of negative inflation surprise from last week.
- Analysts at Arcane Research predict massive volatility in Bitcoin price due to conflicting rate hike expectations.
- Analysts retain a bearish outlook on Bitcoin, predict decline in BTC if the asset fails to hold the $18,923 level.
Crypto traders are awaiting September 21 FOMC and there is a spike in volatility in Bitcoin and altcoin prices. Bitcoin price suffered a 15% decline over the last seven days as crypto traders de-risked and braced for monetary policy tightening.
Also read: XRP price: What to expect from CFTC Commissioners meeting with Brad Garlinghouse
Bitcoin price decline to continue alongside interest rate hikes
Bitcoin price plummeted alongside a nosedive in equities last week. The August Consumer Price Index (CPI) exceeded expectations by 0.2%, as year-on-year inflation hit 8.3%. Bitcoin price witnessed a massive drawdown in response to the market’s risk-averse reaction to CPI news.
US Consumer Price Index YoY
The Bitcoin price decline last week was the worst when compared to previous CPI-related drops in the asset in 2022. The brutal reaction was a result of expectation mismatch and uncertainty among investors, ahead of this week’s FOMC. Analysts at Arcane Research believe the crypto market has priced in a lofty interest rate hike.
Hike probabilities for 21 Sep 2022 FED meeting
Currently, the expectation is 75bps and there is an 80% likelihood of the same. However, investors are prepared for a possible 100bps hike and this week’s decision is key to Bitcoin’s price trend. All FOMC events have resulted in volatility in Bitcoin price and analysts caution investors to prepare for a new burst in BTC volatility on September 21.
Bitcoin volatility during FOMC meetings
Bitcoin price tends to move in a highly correlated manner with Nasdaq and S&P 500 during key macro events like FOMC meetings.
Trading strategy for Bitcoin during FOMC statement release, press conference
To aid traders in setting up trades during the FOMC meeting, researchers presented a rolling 60-minute volatility chart and concluded the effects of FOMC statement release and press conference on Bitcoin volatility.
Rolling 60 minute volatility: BTC during FOMC
Active day traders are the ones most affected by FOMC-induced volatility in Bitcoin price. Therefore, conflicting rate hike expectations for September 21 guarantee exceptionally high volatility. A 100 bps rate hike is likely to have a negative short-term impact on Bitcoin price and a softer hike of 75 bps would reflect positively.
Over longer time frames intraday volatility is irrelevant however, the Federal Reserve’s medium-term view and hike cycle play a key role in determining the direction of Bitcoin’s trend reversal.
BigCheds, a crypto analyst and trader evaluated the Bitcoin price trend and noted that BTC needs to hold above $18,923. A decline below this price level implies a bearish trend reversal in Bitcoin price.
BTC-USD price chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Will Dogecoin (DOGE) price pull an XRP and rally 60% next week?
Dogecoin price has been in a tight range bound movement since November 22. However, the recent recovery above the range low looks promising and hints at an explosive move for next week.
SEC Chair Gary Gensler’s latest call signals tough times ahead for crypto players
US Securities and Exchange Commission (SEC) chair, Gary Gensler, has hinted at tough times ahead for crypto players. In his testimony before the House Appropriations Subcommittee on Financial Service and General Government, Gensler advocated for additional infrastructure.
Crypto firms' de-banking escalates as banks reject applications due to liquidity and regulatory concerns
The crypto market has been facing hurdle after hurdle since Q2 2022 when Three Arrows Capital collapsed, which worsened in November 2022 following the bankruptcy of FTX. This led to a number of crypto companies falling.
Making a case for Binance Bicasso NFTs playing catalyst to BNB price recovery, $357 incoming?
BNB price is up three days in a row despite the legal tussle between the largest exchange by trading volume, its CEO Changpeng Zhao (CZ), and the Commodity Futures Trading Commission (CFTC).
Bitcoin: Breaking down key BTC levels to accumulate for Q2, 2023
Bitcoin price shows an interesting outlook as the first quarter of 2023 comes to an end. BTC has shown strength since day one of 2023 and has netted investors approximately 70% in returns.