The current sideways price action of Bitcoin (BTC) has left investors wondering what the future holds for the world’s largest cryptocurrency. The upcoming interest rate hikes by the Federal Reserve (Fed) may pose the next big challenge for Bitcoin, according to crypto market analysis firm Blofin Academy.
Is Bitcoin ready for the heat of rising interest rates?
The US economy has shown considerable resilience in recent months, prompting the Federal Reserve to consider raising interest rates to stave off inflation. However, this could be bad news for the crypto market, as higher interest rates tend to make traditional investments more attractive, which could lead to decreased demand for Bitcoin and other cryptocurrencies.
The correlation between interest rates and Bitcoin price action has been observed in the past. When interest rates rise, investors tend to move their money into traditional investment vehicles such as stocks and bonds, leading to decreased demand for cryptocurrencies.
However, it’s worth noting that Bitcoin has often been seen as a hedge against inflation, meaning it could still be attractive to investors in times of economic uncertainty.
Federal Reserve Calendar. Fountain: Blofin Academy on Twitter.
The Fed’s next scheduled meeting is scheduled for June 14, 2023, where the central bank will likely discuss raising interest rates in response to the current state of the US economy.
Macro Drivers Leave Crypto Traders Waiting
Noelle Acheson, owner of the “Crypto Is Macro Now” newsletter, has warned against the investors piling into the crypto market right now. While Bitcoin’s upside potential remains significant, Acheson suggests that there is currently no compelling reason for investors to take additional risk.
According to Acheson, there are few macro drivers at the moment, such as debt limit negotiations and Federal Reserve rate policy, that are leaving investors waiting for more clarity before making major investment decisions. As a result, there is a sense of caution in the market as traders wait to see how these macro factors will play out.
Despite the lack of clarity, Acheson points out that there are not many reasons for existing cryptocurrency holders to sell their holdings. This suggests that the current wait-and-see period is not necessarily a sign of bearish sentiment in the market, but rather a period of caution as investors wait for more information.
Acheson also points out that there may be some downside in the near term, but the belief in a potential rally is not strong enough to justify missing out on any potential gains. As a result, there has been some buying and selling in the market, but not enough to significantly increase volatility despite low volumes and liquidity.
At the time of writing, Bitcoin is trading at $26,700, reflecting an increase of 1.2% in the last 24 hours. However, the 50-day moving average (MA) has placed the largest cryptocurrency in a tight range between $26,200 and $26,800. This means that Bitcoin may struggle to break out of its current trading range anytime soon, as the 50-day MA is currently at the higher end of this range on the 1-hour chart, making it a level. hard to get over.
While Bitcoin has seen some bullish moves in recent weeks, the current trading range suggests that further gains may be limited until there is a significant change in market sentiment or a bullish catalyst emerges.
BTC price range and resistance on the 1-hour chart. Source: BTCUSDT on TradingView.com
Featured Image from iStock, Chart from TradingView.com
This post Upcoming Interest Rate Hikes Could Be Bitcoin’s Next Big Challenge, Here’s Why
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