Bitcoin waiting for interest rate announcement; 5 important points to consider in the coming days


After registering its weakest weekly candlestick since July, Bitcoin has a week of important macro factors ahead of it. One of these cases is the interest rate announcement from the Federal Reserve on Thursday.

According to Mihan Blockchain and quoted by Cointelegraph, Bitcoin and other altcoins failed to change their downward trend after the recent drop that occurred following the announcement of the US inflation rate and did not perform well. In continuation of this trend, even this morning we saw the price of Bitcoin drop to the range of $18,300.

The largest digital currency in the market has not yet turned the $20,000 range into a safe support level for itself, and as we approach the beginning of the third week of September, there are concerns that this range may again become a resistance in the direction of Bit. become a coin.

Buyers are very worried these days. During Wednesday and Thursday, the Federal Reserve is going to decide on a possible interest rate increase; A decision that will undoubtedly affect the markets.

In addition, the consequences of the Ethereum crisis continue, and the news related to the return of the damaged bitcoins of the exchange Mt. Gox also leaves the future of the market’s largest digital currency in doubt.

In the following, we will examine 5 important factors that will affect the price of Bitcoin this week.

1- Possible interest rate increase in the spotlight

The meeting of the Federal Reserve regarding the possible increase in interest rates is undoubtedly one of the most important events in the coming days that has attracted a lot of attention.

After the consumer price index (CPI) was announced higher than expected in August, all eyes are now on the Federal Reserve and how to respond to the high rate of inflation.

The CME Group’s FedWatch Tool shows that markets are preparing for a 75 basis point increase in interest rates. However, a 100-basis rate hike is still possible, and if it happens, it will be the first 100-basis rate hike by the Federal Reserve since the early 1980s. If this happens, we can expect a drop in global markets.

Chart of probability of interest rate increase by Federal Reserve - source:
Fed rate hike probability chart – Source: CME

The Federal Open Market Committee (FOMC) is scheduled to hold a meeting in the coming days on September 20-21 (29-30 Shahrivar), and after that, it will probably announce the Federal Reserve’s decision to increase interest rates.

Mike McGlone, chief commodity strategist at Bloomberg, said in an interview in this regard:

The contractionary policies of the Federal Reserve will not be reduced anytime soon. This is human nature because we know how wrong they are.

According to McGlone, risk assets have experienced significant growth since the March 2020 crash, and now, it’s very clear that the time has come for a reversal.

Of course, McGlone pointed out that digital currencies will play a role in the return of prosperity to the markets, and referring to the long-standing theory that exists in relation to Bitcoin and its bright future; Bitcoin will eventually grow, he said. According to McGlone, gold will also outperform. However, both assets will experience declines first.

He finally said:

Unfortunately, for the Fed to stop raising interest rates, risky assets must fall.

A 100-point increase in the interest rate in the coming days will accelerate this process. It should be noted that in addition to the US central bank, the central banks of other countries have finally decided to increase interest rates to fight inflation.

Meanwhile, the popular Games of Trades account tweeted before Wall Street began trading that it’s crunch time for the S&P 500.

Market analyst Kevin Swanson says:

In times like this, when uncertainty is raging around the world, the digital currency market will not do much regardless of the stock market.

2- Bitcoin price drop after weak weekly close

Following the events that happened last week, the price of Bitcoin fell. According to data from the website TradingView, Bitcoin recorded its last weekly candle with a loss of $2,000 and fell below $20,000, its lowest weekly close since July.

Weekly Time Frame Bitcoin Chart
Weekly Time Frame Bitcoin Chart – Source: TradingView

As the weekly Bitcoin candle closes in the red, the decline continues and the price of Bitcoin falls below $19,000.

1 hour time frame bitcoin chart
1 Hour Time Frame Bitcoin Chart – Source: TradingView

The recent bearish mood may be understandable; Many traders used the news of the Ethereum market as an opportunity to sell their holdings, while macro factors contributed to further losses in risky assets.

As it stands, analysts are looking at the chances of the current downtrend being limited, at least until the new interest rate announcement.

Analytical platform Material Indicators tweeted on September 18 (September 27):

Bitcoin started the trading weekend with a loss; However, there is always the possibility of more volatility before the candle closes.

This platform further wrote:

Economic news and announcements related to the Federal Reserve will start to fluctuate again next week.

Along with its tweet, the platform published a chart of the Binance order book, which shows resistance in the $19,800 range.

It is interesting to know that the day before this tweet, Material Indicators in another tweet, referring to traders’ order books, announced the possibility of further decline.

Material Indicators tweet
Source: Twitter

Cheds, the popular cryptocurrency market trader believes Bitcoin It is on the right track and will reach the price floor in the fourth quarter of this year.

He said in another tweet about the weekly Bitcoin candle:

Bitcoin’s weekly candle represents an attempt to break into lower ranges.

At the time of writing, a large number of traders have opened short positions on Binance and FTX, indicating that derivatives traders are looking to lower prices.

3- Fluctuation of the US dollar index

As we look at the macro factors for the coming days, the US Dollar Index (DXY) has now recovered slightly and is back above 109 after the 2% drop it experienced before the August CPI release.

The US dollar index, whose growth is often considered a bearish factor for the digital currency market, is currently below 110 and has been stable for several days.

This index reached 110.78 at the beginning of this month, which is the highest level since 2002 and still remains at levels close to this peak.

Matthew Hyland, a well-known market analyst last week with the future market analysis, noted that the new peak of the US dollar index will probably result from the fall in the prices of risky assets and the surrender of traders.

Tweet Matthew Hyland
Source: Twitter

By looking at the inverse correlation chart between the US dollar index and Bitcoin, it can be seen that the jump growth of one of these causes the fall of the other.

Inverse correlation of US dollar index and Bitcoin - 1 hour time frame
Inverse Correlation of US Dollar Index and Bitcoin – 1 Hour Time Frame – Source: TradingView

4- The not so interesting days of Ethereum after Marj update

It’s been less than a week since the much-anticipated Marj update and the hype has died down drastically.

The price of Ethereum fell by about 25% during the last week. Currently, Ethereum is trading below $1,350, which is the lowest level since July 16. Ethereum’s not-so-interesting conditions may lead to an increase in Bitcoin’s market share (dominance).

Ethereum 1 hour time frame chart
Ethereum 1 Hour Time Frame Chart – Source: TradingView

In this regard, Sonson wrote in a tweet in response to the closing loss of Ethereum’s weekly candle:

Ethereum failed to maintain its critical support.

Meanwhile, Matthew Hyland predicted that the $1,250 support may hold for a while, after which Ethereum will drop to the $1,000 target.

The price of Ethereum against Bitcoin decreased by 19% during the last week, which caused Bitcoin’s share of the entire digital currency market to increase by 1.2% from September 14 (September 24).

Of course, popular trader CryptoGodJohn sees the recent dip as an opportunity to enter.

Bitcoin is currently 16% below its 200-week moving average and Ethereum is 7% above it, according to JAN3 startup CEO Samson Moo.

The 200-week moving average is an important level in bear markets, and its retracement can be a signal for potential upside.

5- The number of long-term Bitcoin holders continues to increase

According to such data, even with recent price volatility and increased intra-chain activity, holders have remained determined to hold on to their holdings.

Coins that have been held in wallets for at least 5 years have taken an upward trend, according to data from the analytics company Glassnod.

In addition, the new data of this analytical platform shows the percentage of BTCs that were last active in September 2017 (September 2016) or before; It has reached 24.8%, which is a new peak.

The graph of the supply of bitcoins that has been moving for more than 5 years
Chart of Bitcoin supply more than 5 years after they moved – Source: Glassnode

Meanwhile, the supply of bitcoins, whose last activity was 5-7 years ago, has reached its highest level in the last two years.

The graph of the supply of bitcoins between 5 and 7 years after their movement
Chart of Bitcoin supply between 5 and 7 years after they moved – Source: Glassnode

Along with the increase in the number of old coins, the trend of moving BTCs that have not been held for a long time has increased. For example, the volume of movement of coins dating back to the last 6-12 months has reached a five-month high.

However, when it comes to the long-term trend of Bitcoin, experienced investors show their belief in the asset by looking at the share of old coins.

In a report last week, Glassnod announced the peak of the long-term supply of Bitcoin and said:

The LTH holdings index is the sum of BTCs that have been inactive for 155 days or more, and statistically, these coins are the least likely to move during volatility. This index has now reached an all-time high of 13.62 million bitcoin units.

It is worth noting that after the announcement of the consumer price index in August, the daily flow of bitcoins to exchanges reached its peak in the last few months.


Leave a Reply

Your email address will not be published.