Daily News | Crypto Traders Anxious as Wall Street Plummets and Bitcoin Reacts to FOMC Interest Rate Increase
Crypto Daily Digest: Wall Street Traders Anxious as Powell Resists Rate Cuts, Bitcoin Drops Below $27k
Good morning, traders! Let’s seize this Thursday relentlessly and make the most of it! 🚀
On Wednesday, Treasury Secretary Janet Yellen’s announcement that the government would not provide broad deposit insurance to stabilize the banking caused financial stocks to plummet, and Federal Reserve Chairman Jerome Powell’s statement dashed hopes for rate cuts this year, causing anxiety among Wall Street traders. The S&P 500 erased a rally that approached 1% and ended the day with a 1.7% decline, while the Treasury two-year yields fell sharply by 23 basis points to 3.94%, and all 22 stocks in the KBW Bank Index dropped by nearly 5%.
Despite increasing expectations for rate cuts, Powell stated that officials do not anticipate rate cuts this year and will increase rates more than anticipated if necessary. The Federal Open Market Committee voted unanimously to increase its target for the federal funds rate by a quarter percentage point to a range of 4.75% to 5%.
As a result of the Fed’s resistance to cutting interest rates this year and the downturn on Wall Street, Asian equities are facing headwinds on Thursday, and government bond yields in the region have opened lower, though the weakness of the US dollar may assist assets in Asia.
Bitcoin‘s value decreased to below $27,000 as the US Federal Open Market Committee (FOMC) announced another quarter-point interest rate increase, citing concerns about inflation. Despite the negative effects of the rate increase on risk assets, analysts believe that Bitcoin may still benefit as it is viewed as both a leading risk-on asset and a financial lifeboat in the event of a banking crisis. However, the recent banking crisis may also bring volatility in the future as the market marches towards a recession or a credit event.
In other news, the US Securities and Exchange Commission (SEC) has filed a lawsuit against Justin Sun, the TRON Foundation, the BitTorrent Foundation, and BitTorrent for allegedly selling and airdropping unregistered securities, market manipulation, and fraud. The SEC accused Sun of inflating the trading volume of TRON‘s native token, TRX, through an extensive wash trading scheme, where his own employees conducted more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled.
Topic of the Day: The Two Crypto Factors That Trumped the FOMC’s Interest Rate Decision
The FOMC’s decision to raise interest rates is significant for the financial markets, but in the world of crypto, the impact of stablecoin supply and the profitability of short-term Bitcoin investors are likely to be just as important for investors.
One of the key indicators is the high profitability of Bitcoin held by short-term investors, with 97.5% of the circulating supply now in profit due to the current price exceeding their average cost basis, per Coindesk report.
However, this situation could change rapidly if investors view the comments made by Federal Reserve Chair Jerome Powell as bearish, leading to additional selling pressure on Bitcoin. On the other hand, if the market interprets his remarks as bullish, then short-term holders may hold their positions and move into the long-term holder category, signaling their belief in the future price of Bitcoin.
The total supply of Bitcoin held by long-term holders has also increased by 5% over the past year, indicating strong investor confidence in the digital asset. Long-term holders tend to be less likely to sell or spend their Bitcoin, providing a supportive base of relatively illiquid supply that can undergird the price of BTC.
In addition to monitoring the behavior of short-term and long-term Bitcoin holders, investors should also pay attention to the supply of stablecoins. stablecoins are important because they serve as a mechanism by which a large portion of digital assets like Bitcoin and ether are purchased.
The aggregate supply net position change of the four top stablecoins has steadily contracted since April 2022, per Glassnode Data. An expansion of stablecoin supply would indicate an increase in capital available for deployment, which would be attractive to investors with a bullish view on BTC.
Overall, investors should keep a close eye on these crypto indicators to determine the future direction of Bitcoin‘s price. While the FOMC’s decision to raise interest rates may have an impact on the broader financial markets, it is the behavior of short-term and long-term Bitcoin holders, as well as the supply of stablecoins, that will likely have a more significant effect on the digital asset.
Bitcoin (BTC) $27290.9 (+0.16%) - Neutral Outlook
Overview:
- Closest daily support zone: 26909 - 26593
- Closest daily resistance zone: 27459 - 27760
- Key Level: 26283 (Weekly Close of Dec. 21 - 28, 2020)
On the weekly chart, BTC experienced its initial rejection from a resistance zone between the weekly Fibonacci extension level of 28540 and the monthly level of 29300. With the RSI signaling overbought conditions, it is likely that BTC will revisit this level before a significant retracement is necessary to gain enough momentum to surpass a previous supply zone [29917 - 32400].
On the daily timeframe, Wednesday’s red candle demonstrated that bulls still outweigh bears, for now, as it retraced from a low that nearly engulfed the candle on Mar. 18. As of Thursday’s trading, BTC is at a critical juncture.
If it falls back to the daily demand zone [26909 - 26583], bears will likely exploit the momentum to push it down to the daily golden zone [25941 - 25512], and subsequently to the weekly golden zone [25100 - 24325].
However, if bulls can prevent BTC from reaching the demand zone and manage to retest the daily supply zone [27969 - 28385], there are two possibilities:
BTC will break through and touch the monthly level of 29300;
BTC will experience an extended period of consolidation between the daily supply and demand zones. It should be noted that the daily RSI indicates that buying momentum has been decreasing, so traders should avoid chasing prices and instead wait patiently for the best entry point.
Daily Resistance zones
- 27459 - 27760
- 27969 - 28385
- 28540 - 29300
Daily Support zones
- 26909 - 26593
- 25941 - 25512
- 25100 - 24325
