Bitcoin Price Dips Below $27,000 Amid Fed Rate Hike Fears
Bitcoin’s price, struggling under the weight of large-volume trades and the looming specter of inflation, slipped below the key support level of $27,000 on May 19, 2023.
Inflation Specter Haunts Crypto Markets
BTC/USD hit lows of $26,380 on Bitstamp, subsequently staging a modest recovery, only to oscillate around a familiar range from prior days. This price dip comes as speculation grows about an impending interest rate hike from the United States Federal Reserve.
Federal Reserve Rate Hike Fuels Fears
Increasing market expectations of an interest rate hike by the Federal Reserve, likely to happen in June, have been fueled by low jobless claims data coupled with hawkish sentiments from Fed officials.
According to a speech by board member Philip Jefferson at the 2023 International Insurance Forum in Washington, D.C., “Inflation is too high, and we have not yet made sufficient progress on reducing it.” He added, “GDP has slowed considerably this year, and even though the effect has been muted in the labor market so far, demand clearly has begun to feel the effects of interest rates that are 5 percentage points higher than they were a little over a year ago.”
Manipulation on Short Timeframes
Analysis from the monitoring resource Material Indicators showed evidence of bid and ask liquidity owners placing trades to manipulate BTC price behavior on short timeframes. Bitcoin’s price has been undergoing a retest of the 100-day moving average, its third in the past seven days.
Traders in “Wait and See” Mode
As traders wait for a clearer direction, bearish targets are now set around the $25,000 range. Michaël van de Poppe, CEO of trading firm Eight, identified the missing key support level of $27,000. However, trading suite Decentrader pointed out a long/short ratio of over 2, stating “this typically needs to resolved and move lower before things start looking bullish.”
With the Fed Chair Jerome Powell due to appear on May 19, further hawkish language on inflation could potentially add pressure to the risk asset price. The crypto markets wait with bated breath as traders adjust their strategies to deal with the possible outcomes.