Bitcoin shows resilience to mounting headwinds, will Powell signal trouble?

Bitcoin and other crypto coins are pushing higher at the start of the week despite escalating trade tensions and questions over the Fed’s ability to cut rates further. However, whale action is helping to buoy the price. 

Bitcoin is recovering from a 4% decline last week and weakness across the weekend. Investors are assessing the risk of an escalating trade war following more tariffs from U.S. President Donald Trump. Trump raised levies on steel and aluminium imports to 25%.  

The move came after 10% of trade tariffs were applied to China, and 25% of tariffs on Mexico and Canada were paused for 30 days. 

Why does this matter? Trade tariffs are inflationary, meaning that the Federal Reserve's 2% target rate for inflation could be slipping further out of reach. 

The Federal Reserve left interest rates unchanged in January at 4.25%—4.5%, with Fed chair Jerome Powell saying that the central bank is in no rush to cut rates until the data show it necessary. 

The risk is that U.S. economic exceptionalism combined with inflationary tariff measures could mean the Federal Reserve won't cut rates at all this year and may even hike rates (although this is not our base case scenario). This is a considerable shift in position from multiple rate cuts projected even in November last year. Due to increased liquidity, Bitcoin and other risk assets perform better in low-interest-rate environments. So, the changing Fed outlook poses a headwind for Bitcoin. 

Attention will be on Federal Reserve Chair Jerome Powell when he testifies before Congress today for further clues about the outlook for interest rates. A cautious Powell could pressurize BTC. US CPI data tomorrow, followed by Powell’s second day of testimony before Congress, will give the Fed chair the opportunity to react to the data.  

Strategy resumes BTC purchases and exchange outflows rise 

Despite the price fluctuations, large buyers appear to be buying the dip.  Strategy, formerly MicroStrategy, bought 7633 Bitcoin between February 3 and February 9 at a price of seven four $2.4 million as it resumes purchases. The latest acquisition puts the average price at $97,255 per Bitcoin. The company total is now 478,740 BTC Friday the 46 billion. This gives the firm control of over 2.2% of bitcoins fixed 21 million supply. 

Furthermore, according to CrptoQuant analyst Papi, last week also saw the largest net outflow of Bitcoin from exchanges since 2022, reducing the supply on platforms by 3%. This could signal growing confidence among institutional players and long-term holders. 

Bitcoin technical analysis 

BTC/USD trades in a holding pattern since mid-December capped by 105k and 91.5k. The price recently found support on the 100 SMA and multi-month rising trendline at 95.5k, recovering higher. The RSI is neutral. 

Buyers will look to extend the recovery above the 50 SMA at 99k and above 100k, the psychological level, to bring 105k into play above here bulls will look to 109.5k and fresh record highs. 

Sellers would need to break below the 100 SMA and rising trendline support at 96k to open the door to 91.5k support zone. A break below here brings 85k into focus. 

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