Following the FOMC meeting earlier this week on Tuesday, Bitcoin (BTC) and the broader cryptocurrency market entered a major crackdown a major correction with the BTC price slipping under $25,000, and the ETH price dropping under $1,650 levels.
Although the Fed paused its rate hike cycle during this FOMC meeting, Chairman Jerome Powell has already hinted at two more rate hikes ahead this year in 2023. This immediately induces a strong selling pressure in Bitcoin and Ether price which have now entered into the oversold territory.
The Fed’s degree of hawkishness remains open to interpretation. The decision to keep interest rates steady at 5.0-5.25 percent was expected and already accounted for in the market. However, there were some noteworthy changes in the Federal Open Market Committee’s projections compared to March.
The projections for Core PCE inflation and the Federal Funds rate increased, which raised concerns in the market. It seems that despite signs of progress, inflation is still seen as a significant issue. Chairman Powell reiterated the commitment to future monetary tightening but highlighted the need to consider economic “lags” as a reason for the current pause.
To put it simply, it’s like a driver slightly easing off the gas pedal, however, with no intention of changing direction.
Bitcoin and ether experienced a significant drop in their prices, going below the lower range of their Bollinger Bands. The Bollinger Bands are a tool that helps track an asset’s average price over 20 days and shows the two standard deviations above and below it.
Typically, an asset’s price tends to stay within two standard deviations of its average around 95 percent of the time. So, when the price breaks the upper or lower range, it is considered a significant event.
Both Bitcoin and Ether fell into the “oversold” territory, as indicated by their Relative Strength Index (RSI). ETH’s RSI dropped to 29, while BTC’s fell to 35. The RSI scale ranges from 0 to 100. Values above 70 suggest that an asset is overbought, while values below 30 suggest it is oversold.
Looking at data from 2015 to the present, BTC’s RSI has settled around 35-36 on 42 occasions, resulting in an average performance of -0.01 percent over the next 30 days. On the other hand, ETH’s RSI settled around 29-31 on 24 occasions since 2017, leading to an average performance of -15 percent over the following 30 days.
Also, Bitcoin’s correlation with US equities continues to widen further. All of the top three US indices – Dow Jones, S&P 500, and Nasdaq Composite – were corrected by nearly 1 percent after the FOMC meeting. However, BTC and all other top altcoins corrected by 5 percent and more on Wednesday.
But we can see a good bounce back today. As of press time, BTC is trading 2.7 percent up at a price of $25,556 with a market cap of $496 billion. Similarly, Ether is trading at 2.16 percent up.
