It’s not unusual for cryptocurrencies to face a downtrend, especially given how volatile the crypto market is. And currently, two of the biggest cryptos, BTC and ETH, are facing this issue. But could this downtrend be the impact of the Fed rate hike? Let’s have a look.
The biggest cryptocurrency in the world, Bitcoin and Ethereum, have experienced a decline in their worth, falling below the levels of $28K and $1,800, respectively. The cause of this decline may be associated with the statement released by the US Federal Reserve that signaled a more lenient approach toward interest rates.
#FED is releasing the interest decision in a few hours— Spot On Chain ✨ (@spotonchain) March 22, 2023
Check out pic👇to see how $BTC price performed in such moments in the past
➡️ The interest is increased from 0.25% to 4.75% in one year
➡️ Most of the time it matched the forecast
➡️ $BTC price was volatile at those times pic.twitter.com/R3IblBVukP
As expected, the Federal Reserve increased interest rates but also indicated the possibility of ending its cycle of raising rates in the event of a financial crisis. However, the central bank emphasized its dedication to reducing inflation and predicted at least one more rate hike this year while making it clear that it does not plan to lower interest rates in 2023.
As a result of this development, the market experienced some instability and doubt, leading to a temporary drop in the value of Bitcoin.
#FireCharts shows how #Bitcoin price continued to erode in the wake of #FED Chair #JPow's remarks, and just like that, a potential retest of technical support at the 200 Week Moving Average is coming into focus.— Material Indicators (@MI_Algos) March 22, 2023
If #BTC bulls can find their footing before ask liquidity returns… pic.twitter.com/yibYd5qgX6
It's also worth mentioning that Bitcoin serves as a means of safeguarding one's wealth against inflation. Therefore, when interest rates increase, people may be less inclined to invest in Bitcoin, which diminishes its attractiveness as a hedge against inflation.
Furthermore, a rise in interest rates can increase the appeal of investing in US dollars, which can lead people to sell their Bitcoin and other cryptocurrencies. As a result, the Federal Reserve's decision was viewed as unfavorable for Bitcoin and other cryptocurrencies.
Bitcoin's Safe Haven Status Boosts Crypto Market, But Fed Decision Affects Its Appeal
In recent weeks, the worldwide cryptocurrency market has been demonstrating impressive performance. This is attributed to people's optimistic views on Bitcoin, as they consider it to be a secure substitute for storing their funds after the collapse of Silicon Valley Bank, as well as two other financial institutions, Signature Bank and Silvergate Capital.
Despite the collapses, as mentioned above, of financial institutions, the value of Bitcoin did not decrease but instead experienced a substantial surge. This led some advocates to believe that it is a feasible alternative to conventional financial institutions for the purpose of safeguarding one's funds.
BTC and wBTC whales are signaling to HODLers: Should you harken pic.twitter.com/RX3Hb1tpC7— crypto Eunicorn (@euniwongg) March 23, 2023
The decreases observed in the value of BTC have been diminishing shortly after the announcement of a 25 basis point hike in interest rates by the US Federal Reserve. The Federal Reserve underscored its prioritization of inflation, despite the recent banking crisis.
Bitcoin has been regarded as a secure means of storing funds and as a strategy for shielding oneself from increasing prices. Nonetheless, when the US Federal Reserve raises interest rates, it can reduce the attractiveness of investing in this crypto. This is because elevated interest rates can increase the appeal of the US dollar, which can lead people to trade their Bitcoin and other cryptocurrencies for the dollar.
The surge in Whale Activity as Big Investors Show Confidence in Bitcoin
Sources have reported that more prominent investors have been purchasing Bitcoin, as well as Wrapping Bitcoin on other networks, which has been occurring for some time.
As of today, Bitcoin whales have conducted more than 13K significant transactions, while Wrapped Bitcoin whales have executed over 100 transactions, indicating that these whales are more active than usual.
As a result, both Bitcoin and Wrapped Bitcoin are currently experiencing their most significant levels of whale activity in multiple weeks. This discovery is likely to have a beneficial effect on their value, as it indicates that prominent investors have faith in Bitcoin's future.
At present, the market value of Bitcoin is around $27,600, with a trading volume of approximately $32.3 billion over the past 24 hours (at the time of writing). Although its worth has dropped by nearly 2%, it still holds the top position on CoinMarketCap, with a market capitalization of about $535 billion.
The BTC/USD pair is presently consolidating around the $28,400 mark after surpassing the $29,250 resistance level. Given the ongoing bullish trend, there is a possibility of Bitcoin's value increasing even further to reach $29,250 or even $30,700.
Bitcoin's support levels remain firm, hovering between $26,600 and $25,200.
Ethereum is presently priced at around $1,753, with a trading volume of approximately $12.6 billion in the last 24 hours (at the time of writing). Recently, it has dropped by around 2.50%. Despite the drop, Ethereum remains the second-highest cryptocurrency on CoinMarketCap, with a market capitalization of about $214 billion.
At present, the ETH/USD pair is undergoing a slight correction, but it is not as severe as Bitcoin's. Nevertheless, this crypto is encountering some obstacles in surpassing the resistance level of $1,800 and is lingering near the support level of $1,700.
Breaking through the $1,800 level is crucial for the pair, and if it manages to do so, it is anticipated to encounter a hurdle at the $1,900 mark.
On the downside, the ETH/USD pair is likely to receive immediate support at either the $1,700 or $1,620 level.