Bitcoin price falls to a multi-month low, but data points to a possible short-term bounce

Bitcoin Struggles as Market Reacts to Fed Rate Hike Expectations

Bitcoin is enduring a tough start to March, with prices falling to a two-week low of $20,050 due to the market’s resurrection of inflationary fears. Jerome Powell’s hawkish comments on March 7 amplified traders’ expectations of a 50-basis point hike in the upcoming policy meeting, causing a spike in negative sentiment. Other events, such as the U.S. government’s billion-dollar Bitcoin transfer of assets seized from Silk Road and a crypto bank’s collapse, further contributed to the bearish mood.

On-chain analytics firm Santiment reported that “fear, doubt and uncertainty” (FUD) have settled in the markets. However, the funding rate for BTC perpetual swaps remains neutral, and the Fear and Greed Index has only slipped to two-month lows of 44, suggesting that any positive rallies are likely to be short-lived.

On the positive side, on-chain data shows that Bitcoin miners and whales are accumulating. The holdings of Bitcoin miners have been on the rise since the beginning of 2023 and are at a six-month peak. Glassnode data also shows an increase in the number of Bitcoin wallets with more than 1,000 BTC.

Analysts have noted that the Fed’s upcoming rate hike is the most important piece of the puzzle that traders need to solve before placing their bets. If the Consumer Price Index (CPI) print on March 14 is higher, it could send the global markets into a risk-off environment leading to the Fed meeting later in the month.

BTC/USD has technically broken below February lows of $21,400, triggering a wider sell-off towards the $20,650 support level. Consecutive daily closes below this level would be a strong bearish sign.

In conclusion, the market’s reaction to the CPI print and Fed’s policy rate decision in March is crucial for momentum traders. However, the compilation of negative news over a bearish macroeconomic background has improved market volatility, which could result in a short-term upside bounce.

Disclaimer: This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.


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