Bitcoin records a 7% drop in the past week as yesterday’s Federal Open Market Committee (FOMC) hinted at a more aggressive US Federal Reserve. As investors reacted to tighter monetary policy, selling pressure pushed BTC price down from the middle area around its current levels.

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At the time of writing, Bitcoin is trading at $43,400 down 3% over 24 hours with the potential to retest more support areas.

BTC trades in a range since the beginning of 2022 on the 4-hour chart. Source: BTCUSD Tradingview

Cumberland Investment Firm believe the FOMC minutes were directly responsible for BTC’s bearish price action. As part of a “wider risk aversion move”, the announcement affected several sectors in the macro markets.

Bitcoin’s relief rally of the last few weeks was also triggered by the Fed. Investors expected an increase in interest rates of around 25 bps. The financial entity announced this increase in March, fulfilling expectations.

This provided more clarity to market participants. However, the Fed became more aggressive in its approach as a result of persistent inflation.

In that sense, the financial institution has forced market participants to adjust their views, which could drive speculators out of their positions. cumberland said:

At this point, one has to wonder if the Brainard/FOMC comment that triggered this move represents significant new information that should be fed to the market in the form of lower prices, or if, on the contrary, this sell-off is really just a case of classic of weakness hands rushing to the exits in a crowded store.

The investment firm believes the second option is more likely. Therefore, they stated that the current downward price action could offer long-term traders a buying opportunity on the downside.

At these levels, as Bitcoin trades in a tight range between $48,000 and $37,000, with no new macro factors to oppose a rally, the market could offer a high reward/low risk scenario. The investment firm added:

(…) If we approach those lows in the absence of a new geopolitical catastrophe, the risk/reward associated with adding more length seems attractive.

The macro perspective and its potential impact on Bitcoin

A senior economist at Natixis, a global financial services company, said the Fed has accelerated its monetary tightening. This could lead the entity to sell part of its balance sheet and keep the price of risky assets low.

The US Fed’s announcement was coupled with a slowdown in China’s economy, the analyst said. The Asian giant has started to tighten its monetary policy, indicating that market participants could become more risk averse and general deleveraging.

However, this situation could become unsustainable in the short term and could force China to lose its monetary policy. The region is currently facing economic weakness, the analyst said.

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This could allow risky assets like Bitcoin to recapture previous highs. the analyst aggregate:

Let me put it another way, with external financial conditions tightening, led by the Fed tightening aggressively in May and beyond, the question is can Asian economies continue and if they can’t due to economic weakness, then there is policy divergence and assets. transcendence.

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