Fed Rate Hike: Will Bitcoin Break Up or Down?

Bitcoin’s future remains uncertain as investors brace for potentially volatile market movements ahead of the Federal Reserve’s announcement.

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  • The market has experienced volatility as the Federal Reserve decides on interest rates.
  • Uncertainty has surrounded how the Fed’s decision will affect Bitcoin, the world’s most popular cryptocurrency.
  • Bitcoin has shown a bullish mat-hold pattern amidst market turbulence.

Market participants brace themselves for a potentially volatile period as the first week of May gets underway. This is due to the Federal Reserve’s scheduled announcement on Wednesday regarding its decision on interest rates, coupled with the release of employment data on Friday.

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According to the CME Group’s FedWatch Tool, there is an 86.6% chance of a 0.25% rate hike, an increase of 3% from the previous Friday. This suggests that there is a high probability that the Fed will indeed apply a 0.25% interest rate hike during its announcement.

CME Group's FedWatch Tool, showing 86.3% possibility for a 0.25% hike.
Target Rate Probabilities for 3rd May 2023. Source: CME Group’s FedWatch

The effect of the Fed’s decision on Bitcoin, the world’s most well-known cryptocurrency, is still uncertain. However, the current trading price for Bitcoin may indicate that market participants are factoring in the rate hike ahead of the Fed’s announcement.

Will Bitcoin Hold Above 50-Day Moving Average?

With the impending market turbulence this week, Bitcoin has shown a bullish mat-hold pattern since last Friday, with the parent candle within Thursday’s trading range. 

Although this pattern usually signals a bullish outcome, the current price action has rejected the candlestick pattern. Whether Bitcoin will sustain its position or rally back up during Monday’s trading day remains to be seen.

Bitcoin Chart showing the potential mat hold chart pattern.
Bitcoin Daily Chart. Source: TradingView

BTC/USD has been hovering around $28,600, having experienced a breakdown from the $29,000 level. 

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If Bitcoin confirms the breakdown on the daily timeframe, traders may be looking towards the 50-day simple moving average, currently around the $28,150 area, as a potential point of interest. If Bitcoin falls below this area, it could indicate a longer-term downtrend.

Bitcoin daily chart showing supports and resistances.
Bitcoin Daily Chart. Source: TradingView

Bitcoin is currently facing a test of support around the $28,690 area on the charts. Further resistance to the upside can be found at $31,418 and $35,593. Conversely, there is also a support level of $25,772.

On the Flipside

  • While a 0.25% interest rate hike is expected, there is still uncertainty about the future trajectory of interest rates, which could impact Bitcoin and the wider market.
  • Bitcoin has weathered previous Fed interest rate hikes, suggesting that it may not be as affected by the Fed’s decision as some may think.
  • Ultimately, the Fed’s decision may not be the sole driver of Bitcoin’s price movements, as many factors can affect the cryptocurrency market.

Why You Should Care

A 0.25% interest rate hike by the Federal Reserve may seem like a small change, but it could significantly impact the Crypto Industry. As the world’s most popular cryptocurrency, Bitcoin is likely to be affected by the Fed’s decision, which could cause a ripple effect throughout the entire crypto market.

FAQs

How does the Fed interest rate affect Bitcoin?

When the Fed lowers interest rates, it makes it easier for banks and businesses to borrow money, stimulating economic growth. This can also increase investment in more volatile assets,  such as Bitcoin. When the Fed raises interest rates, it can make borrowing more expensive and slow economic growth, decreasing investment in riskier assets like Bitcoin.

What is the Bitcoin interest rate?

Bitcoin is a decentralized digital currency. Unlike traditional savings accounts or government-issued bonds, it does not have a fixed interest rate.

What is the best interest rate for Bitcoin?

There is no definitive answer to the best interest rate for Bitcoin. The rate can vary depending on a variety of factors, such as the platform, the amount of Bitcoin invested, and broader market conditions.

What is the loan rate for crypto?

Generally, crypto-backed loans can have interest rates that range from 4% to 12%. Note that some lending platforms may offer rates outside of this range.

To learn more about Bitcoin’s recent volatility and what it means for investors, check out this article:

Bitcoin Investors Grasping for Answers After Wild Bounce Between $27K and $30K

For more information on Ripple’s recent unlocking of one billion XRP from escrow and the concerns around centralization, read here:

Ripple Releases 1B XRP as Part of Distribution Strategy

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Kyle Calvert

Kyle Calvert is a cryptocurrency news reporter for DailyCoin, specializing in Ripple, stablecoins, as well as price and market analysis news. Before his current role, Kyle worked as a student researcher in the cryptocurrency industry, gaining an understanding of how digital currencies work, their potential uses, and their impact on the economy and society. He completed his Masters and Honors degrees in Blockchain Technology within Esports and Business and Event management within Esports at Staffordshire University.