The Bitcoin price has been moving sideways over the past few days bound solely to macroeconomic factors. The benchmark cryptocurrency was rejected north of $20,000 after “The Merge” and seems poised to face volatility over today’s trading session.
At the time of writing, Bitcoin (BTC) trades at $19,200 with sideways movement in the last 24 hours and a 5% loss over the past week. As the market moves past “The Merge”, crypto has returned to its correlation with global markets and the most important factors driving the price action: inflation and interest rates.
BTC’s price moving sideways on the 4-hour chart. Source: BTCUSDT Tradingview
What To Expect For The Bitcoin Price Ahead Of The FOMC Meeting?
Later today the U.S. Federal Reserve (Fed) will hold its Federal Open Market Committee (FOMC) meeting where it will announce its upcoming interest rate hike. As it has happened in the past month, the crypto market is poised to see an uptick in volatility ahead of this major event.
Market participants seem to be expecting another 75 basis points increase after the latest Consumer Price Index (CPI) print and the Non-Farm Payrolls (NFP) metrics. The results of these reports hinted at persistent core inflation in the U.S. dollar, according to trading desk QCP Capital.
The firm believes that the market will be looking at today’s interest rate hikes, the Fed’s plan for the future of its monetary policy, and its reaction to inflation. In that sense, today’s FOMC will be critical for market participants to have a deeper insight into the Fed’s strategy. The trading desk wrote:
(…) we believe the focus will be on the Dot plot. Markets will look for clear guidance on the expected number of hikes for the last 3 FOMC meetings of 2022, as well as the updated terminal rate FOMC members are forecasting for next year.
Without “The Merge” acting as a bullish catalyzer, and with Ethereum trading under a “sell the news” setup, the Bitcoin price and crypto market have flipped to extreme fear levels. This sentiment seems to be the norm across all financial sectors.
As seen below, even Gold is displaying a high correlation with risk-on assets, QCP Capital stated. The precious metal has underperformed in circumstances where Gold should be rallying, with high inflation, and a major arm conflict in Europe (Russia invading Ukraine).
Correlation between Gold and S&P500 (risk assets) trends to the upside. Source: QCP Capital via Twitter
Bitcoin Price Set For A Relief Rally?
Finally, QCP Capital believes the Bitcoin price and the crypto market could see some relief. If the Fed stays within market expectations, announcing a 75-bps interest rate hike, cryptocurrencies and other risks on assets could react to the upside.
As trading firm noted, every FOMC meeting in 2022 has led to a crypto relief rally, this time seems poised to move in tandem with historical data. QCP Capital added:
How long this rally lasts is another question though. Will it just be a single day short squeeze like in May and June? Or can we finally sustain some positive momentum into Q4 and the next CPI pivot in 3 weeks.