Investing.com – Wednesday was a busy day for , which first extended its rally to an early evening high of $18,346 before falling to a low of $17,600 overnight by Wednesday Thursday.
BTC really benefited from the expectation of a generally dovish Fed meeting, forecasts that were reinforced the day before in light of the nice surprise of US inflation below expectations, before falling as the Fed finally turns out to be more cautious than expected.
Although the Fed slowed rate hikes to 0.5% as expected, the Fed statement, the dot chart and Jerome Powell’s speech showed hawkish elements that undermined investor optimism in cryptocurrencies as in other financial markets.
Why Did Bitcoin Fall Ahead of the Fed Meeting?
In particular, the dot chart detailing Fed members’ forecasts for interest rates showed a median expectation for the final interest rate by the end of 2023 of 5.1%, versus 4.6% in the previous projections for the month of September.
Separately, Powell said at the December 14 press conference:
“We could see higher interest rates for a longer period to reach the 2% inflation target.”
The Fed chief also said:
“It’s not so important now how fast we go… It’s much more important to think about what the ultimate level is, and then at some point the question will be how long we will remain restrictive.”
This seems to suggest that a high interest rate environment may set in over time, something that also weighed on Bitcoin and risk assets in general yesterday.
Today, crypto traders’ attention will turn to the ECB meeting, which is also expected to raise interest rates by 0.5%. But as was the case with the Fed, surprises are not ruled out in the central bank’s statement or in President Christine Lagarde’s speech after the interest rate announcement.
Finally, from a graphical point of view, the zone of $17,600/17,500 is the first potential support in case of a continuation of the decline of , before the psychological threshold of $17,000. On the positive side, Wednesday’s low of $18,000 and high of $18,373, as well as the 100-day moving average currently at $18,709 will be the first potential support points.