Bitcoin Shows Weakness Ahead Of FOMC Meeting, Is A Dump Incoming?
Bitcoin price is currently struggling after coming off a turbulent weekend. Most of the digital asset’s reaction was in regards to the FOMC meeting taking place from May 2nd to 3rd, at the end of which the CPI data will be released. As with previous FOMC meetings, the price of Bitcoin has pulled back as investors await the Fed’s announcement.
Bitcoin underperforms ahead of FOMC meeting
Bitcoin has had a rocky start to the week, with the digital asset’s price dropping to the $27,000 level once again. There has been some recovery since then, but it has not been significant by any stretch. Furthermore, the bulls are having a hard time holding the $28,000 support as it is a bear market. As a result, BTC is now looking for support at a much lower level.
Much of the muted sentiment was in response to the FOMC meeting. Expectations for the latest CPI data release vary, but crypto participants will benefit most if inflation drops. This is because lower inflation rates generate greater risk tolerance; therefore, risky assets like Bitcoin tend to receive a lot of support during these times.
However, if the Fed reverts to a hawk stance as it did in 2022, that could be very bad for the market. Lower inflation rates actually lead the Fed to be more dovish, as was the case in the first quarter of 2023, which was very favorable for Bitcoin and cryptocurrencies in general.
Another interest rate hike is expected, but it depends on how much the hike will be. A 25 bps rally would be favorable for risky assets, but crossing the 50 bps mark is likely to lead to a bear market.
BTC weakens for the first time in 2023
The start of 2023 saw Bitcoin move very strongly and peak almost 100% higher than the value it started the year at. However, most of the euphoria triggered by the mini-bull run has now dissipated and investors who bought at the cycle lows have profited from the market.
BTC weakens ahead of FOMC meeting | Source: BTCUSD on TradingView.com
As BTC’s local peak was above $31,000, it has slowly weakened over time. Its current price of just over $27,000 puts the digital asset below its 20-day moving average, indicating bearishness, especially in the near term.
However, the weakness has not affected the long-term bullish case for BTC, as it is still well above both its 100-day and 200-day moving averages. Both show that investors are preferring to wait for higher prices in the longer term rather than chasing short-term profits.
How Bitcoin performs for the rest of the week will largely depend on the FOMC announcement. As usual, the market is expected to be extremely volatile in the hours leading up to the announcement. But where the price goes will depend on the Fed’s decision.