After two challenging weeks, resulting in a 21% decline, the price of Bitcoin (BTC) rebounded emphatically to close last week strongly. The leading cryptocurrency witnessed a surge that ended with a Doji Hammer candle on the weekly chart, signaling a potential bullish reversal. Notably, this rebound has brought Bitcoin’s value back to its previous range of $41,300 to $45,000.
Keith Alan, co-founder of Material Indicators, marked the meaning of this pattern, saying: “It looks like we have formed a Doji Hammer candle on the BTC Weekly chart. That usually indicates that a bullish reversal is coming. […] If we do indeed press a hammer, Bitcoin bulls will have to overcome resistance at the bottom of the Golden Pocket to have a chance at a meaningful move to retest the $44,000 – $45,000 range.”
Bitcoin has also regained its position above the 20- and 50-day Exponential Moving Averages (EMAs), signaling the potential for further gains. However, anticipation surrounding the first meeting of the Federal Open Market Committee (FOMC) in 2024 adds a layer of complexity to Bitcoin’s trajectory.
FOMC example
The upcoming Federal Open Market Committee (FOMC) meeting is expected to be a key determinant of the short-term movement of Bitcoin’s price as it could signal significant shifts in the US Federal Reserve’s monetary policy approach.
Macro analyst @tedtalksmacro provided an in-depth perspective: “This week’s FOMC meeting is critical.” Currently, the market expects the Fed to maintain the status quo, with a 97% probability against any policy change.
“However, there is a 46% chance of a rate cut by the March meeting. Investors should keep a close eye on whether there are signs that the Fed is moving toward a data-dependent approach, whether there is any recognition that inflation is approaching its 2% target, and possible adjustments to its quantitative tightening (QT) policy ),” Ted noted.
After this week, the committee will meet again on March 19 and 20. So this week’s FOMC meeting could lay the groundwork for crucial decisions in March, which could have immediate and pronounced consequences for market dynamics.
The Federal Reserve has predicted that it will cut interest rates three times this year. The market expects a possibility of five or more cuts. There is general agreement that the first rate cut could come in the second quarter, although there is substantial support for the possibility of this happening at the March meeting.
Goldman Sachs has consistently predicted a Fed rate cut in March. Their analysis is based on the significant progress observed in inflation control.
The press conference following the FOMC meeting will be a focal point as investors seek clarity on the collective view of FOMC members, including the newly changed regional Fed bank presidents. These officials, known for their cautious approach to rate cuts, will play an important role in shaping the committee’s decision-making process.
The December inflation report indicated an increase of 3.4% year-on-year, with core prices rising faster than many economists expected. However, the Commerce Department’s personal consumption expenditures (PCE) index, the Fed’s preferred inflation measure, showed promising signs of inflation cooling to 2.9%, closer to the objective of the Fed.
Implications for the Bitcoin Price
Renowned crypto analyst @ColdBloodShill drew attention to the historical inverse correlation between the DXY (Dollar Index) and Bitcoin. He shared the following diagram and declared: “I heard you needed some hopium. The last two FOMC events marked the pico top of the DXY. Wednesday the following.”
A potential decline in the DXY after the FOMC meeting could act as a catalyst for Bitcoin to rise towards the $45,000 mark. In addition, there are possible changes in QT policy that could indicate an increase in the money supply. Such developments could serve as a major catalyst for Bitcoin’s price as the world’s toughest asset.
Featured image created with DALL·E, chart from TradingView.com
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