First Mover Asia: Interest rate hikes in the future? Crypto rally shorts out

Bitcoin drops below $37,000 after soaring to nearly $39,000 following remarks by Federal Reserve Chairman Jerome Powell.

Good morning. Here’s what’s happening:

Market moves: Bitcoin gave up early gains after Powell’s hawkish comments.

Technician's take: Long-term momentum remains weak and BTC is at a critical point.

Prices

Bitcoin (BTC): $36,826 -0.3%

Ether (ETH): $2,470 +0.7%

Top Gainers

Top Losers

Markets

S&P 500: 4,349 -0.1%

DJIA: 34,168 -0.3%

Nasdaq: 13,542 +.02%

Gold: $1,816 -1.7%

Market moves

A relief rally in crypto that had bitcoin trading near $39,000 was short-lived as the largest cryptocurrency by market capitalization fell back below $37,000 after the U.S. Federal Reserve released a statement Wednesday about reducing the size of its balance sheet.

At the time of publication, bitcoin was changing hands at about $36,800, down slightly over the past 24 hours, according to CoinDesk data. Ether, the second biggest cryptocurrency by market capitalization, was trading over $2,450 and was up slightly during the same time period.

Data compiled by CoinDesk shows that bitcoin’s spot trading volume across major crypto exchanges rose on Wednesday compared with a day ago.

Source: CoinDesk/CryptoCompare

Bitcoin briefly rose to nearly $39,000 right after the U.S. central bank released its statement, as the market believed the news was already “priced in.”

Following the stock market, bitcoin gave up the earlier gains as investors and traders weighed Fed Chairman Jerome Powell's comments.

Powell said that he won't rule out an interest rate hike at a future meeting and signaled that the central bank would steadily remove support for the economy in order to fight high inflation.

“After hearing Fed Chair Powell talk, it became clear the risk of more rate hikes was elevated,” Edward Moya, a senior market analyst at Oanda, wrote in his daily market newsletter. “...The Fed may raise rates at every other meeting, with the balance sheet runoff starting in May or June.”

But Moya added that the panic selling of cryptocurrencies may be over as a rally in alternative cryptocurrencies could be coming if bitcoin can stabilize at between $40,000 and $50,000.

Technician's take

Bitcoin's daily price chart shows support/resistance with the RSI on bottom. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin rose from deeply oversold levels over the past two days, indicating renewed buying after a sharp sell-off. The cryptocurrency faces initial resistance at $40,000-$43,000, which could stall the current price bounce.

The relative strength index (RSI) on the daily chart is rising from extreme oversold levels, which could keep buyers active this week. On the weekly chart, the RSI is approaching oversold territory, similar to what happened last July in what was a prelude to a strong price rally.

Still, momentum signals remain weak, indicating limited upside from here. That means buyers will need to make a decisive move above $40,000 to signal a recovery phase.

For now, the downtrend from November remains intact with immediate support at $37,000 and lower support at $30,000.

Important events

8:30 a.m. HKT/SGT (12:30 a.m. UTC): Australia import and export price index (Q4 QoQ)

3 p.m. HKT/SGT (7 a.m. UTC): Switzerland imports and exports, trade balance (Dec. MoM)

9:30 p.m. HKT/SGT (1:30 p.m. UTC): U.S. durable goods orders (Dec.)

9:30 p.m. HKT/SGT (1:30 p.m. UTC): U.S. gross domestic product annualized (Dec.)

9:30 p.m. HKT/SGT (1:30 p.m. UTC): U.S. jobless claims, four-week average (Jan. 21)