Bitcoin falls to recent lows ahead of Fed rate hike
Today Bitcoin resumed its descent remaining in the zone of $18,000 - $20,000. This price zone has been tested as support over ten times during the last four months, and each time Bitcoin has held this level. However, with the Fed anticipated to announce the 5th interest rate hike this year at the conclusion of the FOMC meeting tomorrow, will this level of support remain unbroken?
The first-rate hike in several years occurred in March when the Fed enacted a typical 25 basis point increase to the Fed funds rate taking it from 0% – 0.25% to 0.25% - 0.5%. Bitcoin which was trading at $45,000 at the time and the broader markets as a whole continued to rally on the thought that the Fed may continue to be accommodative with small incremental rate hikes. By May the markets had turned south and investors were hoping that the Fed would take this into account in the May FOMC meeting. When the Fed enacted a 50-basis point hike, however, it outlined the path that the Fed is still walking down today raising rates at the fastest pace since the 1980s. With tomorrow anticipated to bring forth the 5th consecutive rate hike and the 3rd hike of 75 basis points will this supply the needed pressure to bring BTC below $17,500?
One thing we have to remember is that the price of $17,500 which corresponds to the low of June 18th closely matches the long-term 78% retracement stretching from the lows of March 2020 to the ATH reached in November 2021. As I have stated many times before the 78% retracement was the minimum level that Bitcoin would have to retrace to before a new rally could take place so it makes sense that the decline would pause here but the true bottom will likely come in at a lower price.
I still see good chances of Bitcoin breaking this support and trading as low as $14,000 (2018 high). If tomorrow does give us the catalyst for this further drop below $17,500 the fallout afterward will be swift and severe.