- The Federal Reserve reinforced its aims to curb inflation with interest rate rises this year
- The news caused Bitcoin and traditional markets to fall towards key support levels
- Where does the Fed’s intentions leave Bitcoin?
Federal Reserve chair Jerome Powell all but confirmed on Thursday that the Fed is going to ratchet up interest rates to cope with inflation, which resulted in equities tumbling on Friday and ending the week with ugly looking red candles. Bitcoin joined in the party as it kept up its trick of mirroring traditional markets, confirming the theory that such moves by the Fed will impact the cryptocurrency markets too. So how do things now stand on a technical front, and should Bitcoin holders be prepared for further pain?
Bitcoin and Stocks Looking Dicey
The S&P 500 and Nasdaq have been in a downward pattern since topping out in the first week of the year, putting in lower highs even before the ugly red candle on Friday:
The negative move has left both indices approaching key support levels, sitting at key price points that threaten to bring a swift end to the bonanza that has taken place since the March 2020 Covid crash:
Should trendlines like this be broken we could see a bear market for traditional markets, especially with the Federal Reserve discussing more rate hikes later this year and the potential of quantitative tightening. This would almost inevitably take Bitcoin with it, which itself is approaching a support level:
This area has acted as important support and resistance dating back to January 2021, and losing it could see Bitcoin revisiting the low $30,000s again, something that isn’t out of the question given the fundamental narrative. Even a small bounce won’t convince many given Bitcoin’s relation to the stock market and the fact that major fundamental factors are not in its favor.
We can also see that the price action of the last few days has taken Bitcoin out of the bottom of the wedge that dates back to the November 2021 peak:
The best hope for Bitcoin is that the Federal Reserve rows back on its plans for dramatic action to curb inflation, but with mounting pressure from consumer groups over the cost of living this is not exactly likely, suggesting that 2022 could be as bloody as anticipated, starting now.
