Recently, Bitcoin, the leading digital asset, displayed intense volatility near the $27,000 mark. The catalyst behind this wild swing was none other than the Federal Reserve’s chairman, Jerome Powell, who hinted at an imminent end to rate hikes. This unexpected development sent shockwaves through the crypto markets, igniting a frenzy among investors.
US Fed’s Jeromy Powell: No Need To Hike Interest Rate
U.S. Federal Reserve Chairman Jerome Powell assures the public that the country’s banking system remains strong and resilient. He emphasizes that banks received necessary liquidity support without compromising the effectiveness of the Fed’s monetary policy. He said,
“The tools to maintain financial stability are likely to weigh on economic conditions, hiring and inflation. So, as a result, our policy rate may not need to rise as much as it would have to achieve our goals.”
Powell explained that the discrepancy in rate hike expectations between the market and the Federal Reserve indicates a contrasting outlook, where inflation is anticipated to decrease at a faster pace than what officials currently believe. Consequently, Bitcoin demonstrated a heightened sensitivity to indications of earlier or later termination of rate hikes, particularly considering the ongoing conference.
Prior to this, a snapshot of Binance’s Bitcoin order book’s liquidity, shared on Twitter by monitoring resource Material Indicators, revealed a lack of substantial support above the $26,000 level. However, there was a gradual increase in ask liquidity closer to the spot price, approximately at $27,300.
It is to be noted when interest rates are low or expected to remain low, traditional investments such as bonds and savings accounts offer lower returns. As a result, investors may seek alternative assets with higher potential for returns, including Bitcoin.
Bitcoin Shows Signs Of Volatility
Amidst Bitcoin’s fluctuating behavior, there were indications of strain on the traditionally inverse relationship between Bitcoin and the strength of the U.S. dollar.
The U.S. dollar index (DXY) experienced a 0.4% decline throughout the day, briefly dropping to 103 and erasing the gains made earlier. Simultaneously, the latest data from CME Group’s FedWatch Tool reflected a rapid shift in market sentiment towards a potential pause in rate hikes in June.
At the start of the day, there was approximately a 62% probability of a pause, but within the first thirty minutes of Powell’s appearance, that likelihood increased to 80%.
Looking at the 1-hour price chart, BTC price formed a Doji candle, hinting at an intense battle as a high was formed at $27,183. If the BTC price holds a bullish trade above $27K-$27.5K, then the price might get further pushed with intense buying pressure, breaking above multiple resistance levels from $28K.
However, bulls need to strongly defend the support level at $26.6K as a breakout below will affect bullish sentiment, and sellers might get an opportunity to lower the price.