The current sideways price action of Bitcoin (BTC) has investors wondering what the future holds for the world’s largest cryptocurrency. The upcoming Federal Reserve (Fed) interest rate hike may pose the next big challenge for Bitcoin, ACCORDING to crypto market analysis firm Blofin Academy.
Is Bitcoin Ready For The Heat Of Rising Interest Rates?
The US economy has shown considerable strength in recent months, prompting the Fed to consider raising interest rates to curb inflation. However, this could be bad news for the crypto market, as higher interest rates tend to make traditional investments more attractive, which could lead to a decrease in demand for Bitcoin. and other cryptocurrencies.
The correlation between interest rates and the price action of Bitcoin has been observed in the past. When interest rates rise, investors tend to shift their money to traditional investment vehicles such as stocks and bonds, leading to a decrease in demand for cryptocurrencies.
However, it is worth noting that Bitcoin is often viewed as a hedge against inflation, which means it may still hold some appeal for investors in times of economic uncertainty.
The next scheduled meeting of the Fed is scheduled to take place on June 14, 2023, where the central bank will likely discuss the possibility of raising interest rates in response to the current state of the US economy.
Macro Determinants Leave Crypto Traders Waiting
Noelle Acheson, owner of the “Crypto Is Macro Now” newsletter, has Warned against investors flocking to the crypto market these days. While the upside potential for Bitcoin remains significant, Acheson suggests that there is currently no compelling reason for investors to take more risk.
According to Acheson, there are some macro determinants at the moment, such as debt limit negotiations and Fed rate policy, which leave investors waiting for more clarity before making any big decisions. investment decision. As a result, there is a sense of caution in the market as traders wait to see how these macro factors play out.
Despite the lack of clarity, Acheson says there isn’t much reason for existing crypto holders to sell their holdings. This suggests that the current wait-and-see period is not necessarily a sign of bearish market sentiment, but a time of caution as investors await more information.
Acheson also noted that there could be some downside movement in the near term, but the belief in a potential rally is not strong enough to warrant the possibility of losing any potential gains. As a result, there was some buying and selling in the market, but not enough to increase volatility despite low volumes and liquidity.
At the time of writing, Bitcoin is trading at $26,700, reflecting a 1.2% increase over the past 24 hours. However, the 50-day Moving Average (MA) puts the largest cryptocurrency in a narrow range between $26,200 and $26,800. This means that Bitcoin may struggle to surpass its current trading range in the near term, as the 50-day MA is currently located at the upper end of this range on the 1-hour chart, making it a challenging offense level.
While Bitcoin has experienced some upside moves in recent weeks, the current trading range suggests that further gains may be limited until there is a significant shift in market sentiment or the emergence of a bullish catalyst.
Featured image from iStock, chart from TradingView.com