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Bitcoin testing its support again thanks to Powell

Jerome Powell, Chairman of Fed, had significant impact on the yesterday’s price action of almost all markets. That obviously applies to cryptocurrencies as well. What was the reaction of the biggest one, Bitcoin, after his remarks?

Before we look at Bitcoin, it is necessary to know what Jerome Powell said. The following sentence was probably one of the most crucial ones:

„We make these decisions at the meeting and we’ll make them meeting by meeting, but I will say that 50 bps will be on the table for the May meeting.”

The Fed meeting in May will be again, very important for markets. The interest rate hikes will be without any doubt on the table and as he mentioned yesterday, it might be a hike of 0.5%, which is not so usual. This statement sent not only indices, but also Bitcoin down.

Read more: Fidelity is heading into the metaverse

However, from the long term perspective, I see it as a positive, since markets will have the time to absorb this information. Thus, if we see 50 bps rate hike in May, the markets should not be expected to move vastly to any direction.

From resistance to support

We can only assume that this statement had the power to push Bitcoin down to its previous support around 40 000 dollars, instead of breaking the resistance above 42 000 dollars. We have thus moved back to the Point of Control level around 40 418 USD. We are still clearly in a huge triangle that you can see below.

The downward support is now formed around levels of 37 976 – 39 035 USD. Upward resistance is in the form of a trendline. I think that for a few coming days we will be mostly moving between these two zones, which will then lead to a major break.

TradingView Chart

4h chart of Bitcoin, Source: Author’s analysis, tradingview.com

Daily chart unchanged

The rejection which we saw yesterday cannot be considered to be very favourable in this situation, especially for the daily chart. Nevertheless, the strongest support level is still between 38 000 – 40 000 USD. The volumes there are huge and there is also the lower part of the channel. For the daily chart I still see two different possibilities, with both of them leading to a move to 30 000 dollars.

Yesterday’s movement rejected the upward price action and means that currently the chart looks a bit more bearish, hence, preparing for a downward move. However, the strong support zone of 38 – 40 thousand dollars will be decisive.

TradingView Chart

1D chart of Bitcoin, Source: Author’s analysis, tradingview.com

Conclusion

I think that the steps taken by Powell are logical (late, but logical). Overall, it is better for markets to get this news a bit in advance so that the investors and traders can absorb it. A huge surprise during the Fed meeting could have a potential power to move violently with markets, which is something that Powell wants to limit by this form of signalling. His remarks of possible 0.5% rate hike are already preparing markets for this rather atypical step, so that we would not see a huge surprise reaction.

Jakub is a crypto trader and founder of Trader 2.0 project, which helps hundreds of traders from central Europe to understand cryptocurrency trading and its challenges. Jakub not o...

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