Bitcoin Rally Botched After Powell’s Hawkish Comments

Morgan Stanley Publishes Glowing Bitcoin Report

The flagship cryptocurrency reached an intraday high at $42,978 on Thursday but the rally failed soon after Fed Chair Jerome Powell discussed the possibility of a bigger hike at the next FOMC meeting.

According to a CNBC report, the Federal Reserve Chair considered that it’s “absolutely essential” to restore price stability. He added: “We’re really going to be raising rates and getting expeditiously to levels that are more neutral and then that are actually tight … if that turns out to be appropriate once we get there”, which increased the market’s expectation for a 50 bps rate hike at the next Meeting.

The comments had a direct impact on Bitcoin, which was trading above $41,000 at the time but dropped into the $40,000 area soon after. Despite interest rates and a risk-off environment caused by the war in Ukraine, capital is flowing into cryptocurrencies, according to Glassnode founders and according to Santiment (crypto market data analysis company).

In other news, Morgan Stanley recently published a report that highlighted the benefits of using Bitcoin’s Lightning Network and showed that the banking institution considers Bitcoin payments superior to those made via a credit card. This comes after Arcane Research recently published data that showed a 410% year-over-year increase in transactions made via the Lightning Network.

Chart Analysis – BTC/USD

At press time, Bitcoin is trading at 40,470 against the US Dollar and has recently failed to move above the 50-day Moving Average. Thursday’s candle shows that the pair pierced through the MA but then the bears stepped in and brought the price below the line, closing the day in the red.

Since April 11, BTC has been crawling on the bullish trend line seen on the chart below and bounced several times on the support located at $40,000. This shows that neither bulls nor bears have the necessary strength to break through significant barriers: the bears cannot break $40K and the bulls cannot break the 50-day MA.

The MACD is almost flat but it looks like it could cross upwards, which would be a bullish sign (albeit a weak one). The Relative Strength Index is sluggish but moving south, without being oversold, which means that there is still room to drop (also, a weak signal).

From a longer-term perspective (since January) Bitcoin’s chart has been making higher lows and higher highs, which happens when an asset is in an uptrend. But can we consider this an uptrend? Not really. Is it a downtrend? Nope. It’s a period when the market decides on the next strong move and until then, caution is recommended.