/How Will Bitcoin React to the Federal Reserve FOMC Statement?

How Will Bitcoin React to the Federal Reserve FOMC Statement?

Bitcoin has been trading sideways ahead of the Federal Reserve (Fed) FOMC statement. The FOMC projections are also expected to be released following the rate statement.

This is the first anticipated rate hike from the Fed since 2018. The market initially expected +0.50% (50bps) hike in today’s monetary policy meeting.

Due to the war in Europe between Russia and Ukraine the expectations were reduced to a mere 25bps. Inflation is pressuring the Fed to raise rates.

US CPI

source: tradingeconomics

The sharp rise in the US Consumer Price Index (CPI) is forcing the Fed to act in an effort to curb inflation. Based on historic monetary policy meetings, cryptocurrencies tend to react to a shift in monetary policies.

Bitcoin is the center of attention in the upcoming Fed monetary policy meeting. The correlation between BTCUSD and the S&P 500 was 0.01 between 2017 – 2019.

In 2020 – 2021 the SP500 – BTC correlation increased to 0.36. If the correlation is 1, it means Bitcoin and the US index are perfectly aligned with each other.

btc sp500 correlation

source: tradingview, BTCUSD/SP500 correlation, daily chart

At the beginning of 2022  Bitcoin 
Bitcoin

Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities.

Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities.
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correlation to the SP500 was 0.3. Due to the correlation there is a fair possibility BTCUSD will react to the Fed monetary policy, in tandem with the SP500.

As the rate hike itself is already priced-in, what may affect BTC price are the economic projections and the accompanying rate statement.

The market would like to reaffirm the pace of future rate hikes. Employment figures have been strong.

Fed Funds

source: CME

At the time of this writing there is a 96.3% chance for a rate hike of at least 25bps in today’s Federal Reserve meeting. As it is fully priced-in. the rate hike itself may not be the reason for a significant reaction but the accompanying rate statement and projections.

In the press conference, Fed Jerome Powell is likely to be asked whether the conflict between Russia and Ukraine (including the sanctions) will affect future monetary policies.

Powell may also be asked regarding the regulatory framework for  cryptocurrencies 
Cryptocurrencies

By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.

By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term
following Biden’s executive order. His answer may affect the top cryptocurrencies.

Future Rate Hikes Odds

Although the current expectations are for multiple rate hikes in 2022, the risk aversion is stemming from Russia may alter the outlook. While it may not necessarily be mentioned in today’s meeting, I would expect the Fed to cool the market’s expectations for rapid rate hikes.

If Powell tries to cool the pace of future interest rate hikes today, it may reflect at the pricing-in for 4 May meeting. At the time of this writing, the odds for a rate hike of 50 – 75bps in May is 47.6%, a 75 – 100bps interest rate hike in May’s meeting is 50.5%.

Bitcoin is likely to react in accordance to the outcome of the meeting.

Is It Time to Buy or Sell Bitcoin?

Earlier today a bullish spike took place in Bitcoin, sending the price from 39,000 to 41,600 (approx.). The market quickly pared the gains, sending the price back towards 39,000.

btc spike

BTCUSD 15min Chart

Simar price movements are common in the Foreign Exchange (Forex) market. Stop hunting is among the reasons for this phenomena. It is challenging to determine whether stop hunting was the cause for the spike in Bitcoin.

Due to the short-lived spike, short BTC positions were liquidated. Out of the $47.3 million that were liquidated, $38.82 shorts evaporated on Okex.

btc short liquidations

source: coinglass

Based on my experience with cryptos, traders that were holding long positions were caught in the spike. Other traders that anticipated a breakout via intraday time frames joined the ‘rally’ and were later liquidated as the price corrected lower.

After assessing Bitcoin (BTCUSD) the price is contained in side a range.

btcusd fomc

BTCUSD 4hr Chart

The recent gains that are taking place in Bitcoin are often seen following a significant retracement. In this case it is the shadow of the bullish spike that took place earlier today. However, it offers little indication as to where Bitcoin may be heading.

On shorter time frames BTCUSD is facing some resistance, which may drive the price lower prior to the Fed monetary policy meeting. Based solely on technical analysis, a whipsaw reaction may take place where $38,700 may be reached.

Breaking above $41,600 may extend BTC gains towards $45,000.

Bitcoin has been trading sideways ahead of the Federal Reserve (Fed) FOMC statement. The FOMC projections are also expected to be released following the rate statement.

This is the first anticipated rate hike from the Fed since 2018. The market initially expected +0.50% (50bps) hike in today’s monetary policy meeting.

Due to the war in Europe between Russia and Ukraine the expectations were reduced to a mere 25bps. Inflation is pressuring the Fed to raise rates.

US CPI

source: tradingeconomics

The sharp rise in the US Consumer Price Index (CPI) is forcing the Fed to act in an effort to curb inflation. Based on historic monetary policy meetings, cryptocurrencies tend to react to a shift in monetary policies.

Bitcoin is the center of attention in the upcoming Fed monetary policy meeting. The correlation between BTCUSD and the S&P 500 was 0.01 between 2017 – 2019.

In 2020 – 2021 the SP500 – BTC correlation increased to 0.36. If the correlation is 1, it means Bitcoin and the US index are perfectly aligned with each other.

btc sp500 correlation

source: tradingview, BTCUSD/SP500 correlation, daily chart

At the beginning of 2022  Bitcoin 
Bitcoin

Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities.

Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities.
Read this Term
correlation to the SP500 was 0.3. Due to the correlation there is a fair possibility BTCUSD will react to the Fed monetary policy, in tandem with the SP500.

As the rate hike itself is already priced-in, what may affect BTC price are the economic projections and the accompanying rate statement.

The market would like to reaffirm the pace of future rate hikes. Employment figures have been strong.

Fed Funds

source: CME

At the time of this writing there is a 96.3% chance for a rate hike of at least 25bps in today’s Federal Reserve meeting. As it is fully priced-in. the rate hike itself may not be the reason for a significant reaction but the accompanying rate statement and projections.

In the press conference, Fed Jerome Powell is likely to be asked whether the conflict between Russia and Ukraine (including the sanctions) will affect future monetary policies.

Powell may also be asked regarding the regulatory framework for  cryptocurrencies 
Cryptocurrencies

By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.

By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term
following Biden’s executive order. His answer may affect the top cryptocurrencies.

Future Rate Hikes Odds

Although the current expectations are for multiple rate hikes in 2022, the risk aversion is stemming from Russia may alter the outlook. While it may not necessarily be mentioned in today’s meeting, I would expect the Fed to cool the market’s expectations for rapid rate hikes.

If Powell tries to cool the pace of future interest rate hikes today, it may reflect at the pricing-in for 4 May meeting. At the time of this writing, the odds for a rate hike of 50 – 75bps in May is 47.6%, a 75 – 100bps interest rate hike in May’s meeting is 50.5%.

Bitcoin is likely to react in accordance to the outcome of the meeting.

Is It Time to Buy or Sell Bitcoin?

Earlier today a bullish spike took place in Bitcoin, sending the price from 39,000 to 41,600 (approx.). The market quickly pared the gains, sending the price back towards 39,000.

btc spike

BTCUSD 15min Chart

Simar price movements are common in the Foreign Exchange (Forex) market. Stop hunting is among the reasons for this phenomena. It is challenging to determine whether stop hunting was the cause for the spike in Bitcoin.

Due to the short-lived spike, short BTC positions were liquidated. Out of the $47.3 million that were liquidated, $38.82 shorts evaporated on Okex.

btc short liquidations

source: coinglass

Based on my experience with cryptos, traders that were holding long positions were caught in the spike. Other traders that anticipated a breakout via intraday time frames joined the ‘rally’ and were later liquidated as the price corrected lower.

After assessing Bitcoin (BTCUSD) the price is contained in side a range.

btcusd fomc

BTCUSD 4hr Chart

The recent gains that are taking place in Bitcoin are often seen following a significant retracement. In this case it is the shadow of the bullish spike that took place earlier today. However, it offers little indication as to where Bitcoin may be heading.

On shorter time frames BTCUSD is facing some resistance, which may drive the price lower prior to the Fed monetary policy meeting. Based solely on technical analysis, a whipsaw reaction may take place where $38,700 may be reached.

Breaking above $41,600 may extend BTC gains towards $45,000.

Original Source