Bitcoin Stuck Between Fed Risks and Clarity Act Delays

BTC needs a decisive break above $67K to invalidate the bearish double-top formation.

The waters remain murky for Bitcoin and the broader crypto market as progress on the Clarity Act has stalled and the odds of a Fed rate hike in September have increased. The FOMC maintained a target rate of 3.50% – 3.75%, as it was largely anticipated.

At the time of writing, the CME FedWatch tool shows a 65% probability the Fed will add 25 bps to the rate in September. Higher rates are detrimental to risk assets such as cryptocurrencies because liquidity drops and safer investments become more attractive.

Businesses and consumers usually spend less as borrowing costs increase. This leads to reduced liquidity and also reduced demand for Bitcoin. Lower demand usually translates into lower prices. Of course, this relationship is not perfect because other catalysts, such as regulatory developments, can spark substantial rallies even when the interest rate is high.

But, at least for the time being, the Clarity Act, which would be the biggest regulatory catalyst, is stalling. Last week, it looked like the White House and the Democrats had reached a compromise regarding ethics provisions. However, hopes for the crypto bill have faded since, as the US Senate postponed the legislation to prioritize a package of sanctions for Russia and other matters. This heavily reduces the probability that the Clarity Act would be signed before the Senate’s summer recess, which starts on August 8.

The US-Iran war is another deterrent for Bitcoin, and there are few signs that it will be resolved anytime soon. The two countries paused hostilities at the end of last week, in an effort to resume peace talks. However, the fragile ceasefire crumbled as US forces launched strikes against Iran after the latter attacked a US military base in Jordan on Tuesday.

Chart Analysis – BTC/USD

Bitcoin recovered the losses incurred on Wednesday after the rate announcement and Warsh’s press conference, but now a double-top pattern has emerged at $67K.

The resistance at $65K was breached on two separate occasions, but the bulls failed to capitalize on both breaks and the price returned below resistance. Both breakout attempts failed at $67K, forming a double top, which is a bearish pattern. Currently, the price is hovering near $65K, above the 50-day Moving Average (blue line on the chart), with a neutral RSI that moves in the middle of its range.

The most important levels for short-term price action are $65K and $67K. If the bulls fail to breach any of them, this could result in a drop towards the $60K area. On the other hand, a break of the double top at $67K could send Bitcoin above all three Moving Averages, setting the stage for a trend reversal.