Bitcoin Traders Aim to Test $53,000 Support as BTC Price Predictions Remain Bearish After Fed Meeting
Bitcoin (BTC) traders are focusing on testing the $53,000 support level as predictions for the cryptocurrency’s price remain bearish following the Federal Reserve (Fed) meeting. The BTC price is currently consolidating in the mid-$57,000s, experiencing a 5% decrease for the day. However, it is still up around 1.5% or $1,000 from earlier session lows. Traders are evaluating the impact of the Fed’s latest policy announcement on the outlook for interest rate cuts this year.
As anticipated, the Fed has maintained interest rates at historically high levels of 5.25-5.5% and has slowed down the reduction of its balance sheet. The central bank will now allow its portfolio of assets to shrink by only $25 billion per month, compared to the previous reduction of $60 billion per month. This larger reduction in the balance sheet size than expected has led to a dovish market reaction.
Initially, the Bitcoin price briefly surged to the mid-$59,000s, and US stocks also saw gains. However, these movements quickly reversed. Currently, Bitcoin is trading at a similar level to before the Fed’s announcement.
During the meeting, Fed Chair Jerome Powell acknowledged the higher-than-expected inflation data observed this year. He stated that gaining confidence to cut interest rates will take longer than anticipated. According to CME data, the implied probability of a 25 basis points interest rate cut by September has risen to 54% from 46% in the previous day. Conversely, the probability of no rate cuts this year has decreased to 16% from 27%. The market interpreted the Fed meeting as slightly more dovish than expected, resulting in the Bitcoin price rebounding from its lows.
However, despite the recovery, recent technical developments indicate that Bitcoin may experience further downward movement. Prior to the Fed meeting, Bitcoin had already dropped nearly 5% from just below $61,000. This decline followed a 5% decrease from around $65,000 on the previous day. The drop in Bitcoin prices is attributed to US economic data indicating persistent inflation pressures and an increase in outflows from Bitcoin exchange-traded funds (ETFs).
Data presented by The Block shows that US Bitcoin ETFs have experienced outflows for five consecutive days. Importantly, Wednesday’s dip caused Bitcoin to break below its two-month range of $60,000 to $74,000. The next significant support level for Bitcoin is not expected until the mid-February highs at $53,000. Many analysts are now predicting that BTC will drop to the low $50,000s.
Analysts are paying close attention to the average entry price of US Bitcoin ETF buyers, which is $57,300. Markus Thielen, the CEO of 10x, stated that there may have been a substantial number of traditional finance investors entering the crypto market, driving up long positions in anticipation of the halving event. However, this trend is expected to reverse, resulting in a correction of around 25% to 29% from the $73,000 peak. This explains the price target of $52,000 to $55,000 that has been projected in recent weeks.
Please note that cryptocurrency is a high-risk asset class, and this article is provided for informational purposes only and does not constitute investment advice. There is a possibility of losing all invested capital.