Bitcoin Retracts as Fed Policy’s Restrictive Rates

Bitcoin’s bullish trend got broken earlier this Wednesday.

The cryptocurrency saw a stable upwards trend starting on August 9th. Bitcoin’s price kept increasing for over a week, going from $22,880 at the start of the trend, to reaching $25,205 at its very peak.

On this Wednesday, August 17th, the major cryptocurrency decreased by more than 2%, breaking through a bullish trendline formed by the lows of July 15 and July 26. Investors immediately grew concerned about a deeper sell-off.

The reason for this drop in price is said to be due to the United States Federal Reserve’s latest policy discussions. On that same Wednesday, August 17th, policymakers discussed wetter to continue raising interest rates in an attempt to control inflation over an extended period of time by maintaining borrowing prices at levels that impede U.S. economic development.

The drive for more rate increases and stringent regulations runs counter to recent market pricing, which hinted at expectations of interest-rate reductions in 2023 and drove bitcoin to a two-month high of $25,203. Market volatility could be brought on by the surprise.

“It seems reasonable that increasing and elevated rates are headwinds for bitcoin,” researcher at Decentral Park Capital, Lewis Harland said. “The Fed appears to keep consistent in their inflation north star and the cost seems like an economic contraction.”

Federal Reserve Influence

Bitcoin is usually susceptible to United States Federal Reserve policies. The cryptocurrency nearly broke the $20,000 mark when the US Federal Reserve met with economists to discuss a rate hike as economic problems and global inflation intensified.

Recent Fed rate hikes have been the most aggressive in decades due to the US Government attempts to control inflation after the pandemic. July’s meeting took place as investors tried to determine whether the Fed’s decision has already caused or will cause a recession, which could have disastrous effects on all global markets, including the cryptocurrency market.

Bitcoin’s Turning Point

Investors are expecting that the Fed’s liquidity shortening may end in 2023. Meanwhile, Bitcoin seems to have stabilized at the $23,443 resistance line.

Despite being far below the $25,000 mark it reached during the bull trend, Bitcoin seems to have recovered from the Fed’s blow.

On today’s (August 18th) daily chart, Bitcoin saw a small increase of 0.98%, which corroborates the idea of the cryptocurrency having stabilized after the Fed Minutes report of yesterday.

Just like it did after July’s rate hikes, Bitcoin usually does pretty well after external interventions to its price. The leading cryptocurrency was able to continue July’s upward momentum, which makes investors somewhat optimistic about Bitcoin’s chances for the end of the year.

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