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23.03.2023 01:25 PM
Bitcoin maintains stability after the Fed meeting: what indicates the likelihood of a correction?

The Fed meeting on March 22 was called a key event that will show how the situation in the global economy will change in the coming months. Analysts also called yesterday's meeting of the regulator the most unpredictable since 2003.

Crypto market volatility rose sharply in the run-up to the policy meeting and the decision to raise the key rate. We saw sharp price movements in both directions, as well as Powell's positive rhetoric from the meeting.

Results of the Fed meeting

Financial markets were preparing for the fact that despite all the turbulence of the banking system, the rate would be raised by 25 basis points—which is exactly what happened at the end of yesterday's meeting, and the key rate reached 5%.

Following the meeting, Fed Chairman Jerome Powell noted that the Fed was considering raising the peak rate to the situation in the banking system. Officials considered pausing the rate hike, but decided to raise the rate by 25 bps.

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Powell also noted that despite the turbulence in the banking sector, the Fed will continue to reduce the balance sheet. The U.S. central bank continues its course for annual inflation of 2% and will make further decisions on raising the rate based on the market situation.

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In general, the Fed has taken the steps that the financial markets expected, and therefore we have seen increased volatility and sharp price movement in both directions. Summing up, we can say that the Fed meeting had no fundamental effect, and impulse price movements are a common thing at a surge of volatility.

Macroeconomic Sentiment

The situation in the U.S. banking system has radically changed the rhetoric of leading financial institutions, and has also significantly increased the demand for cryptocurrencies. Expectations for a rate cut in 2023 have skyrocketed among investment managers, according to a BofA survey.

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At the same time, the majority of respondents are confident that the peak rate will remain at the level of 5%–5.25%. As a result, more and more managers expect to see a recession in the U.S. economy in the second half of 2023. BofA analysts expect a stronger fall in the stock market at the end of the Fed's rate hike cycle.

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Also, Goldman Sachs predicts a more cautious policy of U.S. regional banks in lending, which can further aggravate the situation with liquidity. With $95 billion being withdrawn from the U.S. economy each month, the combination of these factors could hit America's investment capacity hard.

Is Bitcoin headed for a correction?

The Fed meeting provoked new changes in the investment strategy and once again confirmed the importance of preserving capital, not increasing. Given the growth of BTC in recent weeks, we should expect the beginning of mass profit taking.

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Glassnode analysts have already noted that the market tends to sell the asset to fix a small profit. A similar situation is observed among mining players. Over the past two days, miner stocks have decreased by 668 BTC, equivalent to $18.3 million.

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At the same time, Bitcoin came close to the powerful $29k–$31.5k resistance zone, where large amounts of liquidity are concentrated. As a result of yesterday, BTC retested the upper and lower limits of the $26.7k–$28.9k fluctuation range.

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This indicates the equality of bulls and bears, and accordingly, we should expect the asset to consolidate in this range in the near term. At the same time, the longer the price stays in the $26.7k–$28.9k area, the more take-profit sentiment will grow.

Results

Bitcoin has reached the final point of the upward movement, and in order to continue the bullish trend, the asset needs to significantly increase investor interest. In the medium term, the cryptocurrency is waiting for a profit-taking stage, which will end with accumulation and an attempt to start another bullish trend.

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Among the key targets for correction, it is worth highlighting the $23.9k–$25.2k level, where the key support zone lies. A downward movement of the asset to $22.5k is not excluded to collect the necessary liquidity and resume the upward trend.

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