Bitcoin Makes Serious Advances. Here’s How the Fed Helped.
Wednesday, July 27, the Fed announced a 75-bps rate hike, which effectively sent Bitcoin 8.0% higher, from an open at $21,266 to a close at $22.969. Wednesday’s high was $23,112 and the bulls continued to push the following days, reaching a high at $24,445 at the time of writing.
Bitcoin’s surge is closely related to the Fed hike and here’s why: around the time of the interest rate announcement, speculation surrounding a 1.0% rate hike (100 bps) had increased. When the actual announcement came out, it eased concerns about more aggressive anti-inflationary measures. On top of that, Fed Chair Powell sounded relatively confident regarding slowing down inflation and mentioned that “at some point” the hikes should be scaled back.
A lot of voices say that Bitcoin is an inflationary hedge due to its capped supply at 21 million coins. If the Fed would have hiked by 100 bps, this would be viewed as bearish for Bitcoin because the demand for inflationary hedges would have decreased. The 75 bps hike combined with Powell’s forward guidance eased concerns about an aggressive policy and set the stage for Bitcoin’s rally.
The rest of the crypto market followed the leader. The top mover in the Top 10 is Ethereum, with an almost 9.0% gain over the last 7 days, currently trading at $1,732. Binance Coin (BNB) is up 4% in the last 24 hours, currently trading at $279. Solana (SOL) is up more than 10% over the last period and Cardano (ADA) gained more than 7% in the last 7 days.
Outside the Top 10, some of the biggest gainers are Ethereum Classic with more than 71% over the last 7 days, Uniswap with +26.70%, and EOS with an almost 23% gain over the last 7 days.
Technical Analysis – BTC/USD
The main takeaway from the chart below is that Bitcoin has finally managed to break the long-term bearish trend line drawn from the March top. The pair has also moved above the 50-day Moving Average and the break of this confluence zone (trend line + 50 MA) signifies a major victory for the bulls.
For a long time, we have speculated that a bottom may be in place after the $17,592 low was hit but this breakout is the first substantial sign that the pair is headed higher. Keep in mind that BTC is still dealing with strong resistance at $25,000 followed by $25,400. Also, $24,000 is still in play because we don’t have a daily close above it, although it was breached several times.
Despite recent strength exhibited by the bulls, let’s not forget that the pair is still in a long-term downtrend, thus we shouldn’t disregard the possibility that the current move up is just a relief rally. Watch for pullbacks once the RSI reaches overbought.