Key Points
- Bitcoin and other digital currencies are trading cautiously ahead of the year’s first interest rate decision.
- Bitcoin’s price may drop after the Federal Open Market Committee (FOMC) decision due to a double-top pattern.
Bitcoin, altcoins, and other assets such as stocks and bonds exhibited a narrow trading range on Wednesday. This is as the market awaits the first interest rate decision of the year.
Bitcoin (BTC) was trading at $102,000, whereas key altcoins like Ethereum (ETH), Ripple (XRP), and Solana (SOL) retreated by less than 5%. DeXe, Raydium, Jupiter, and Pudgy Penguins were the top underperformers, falling by double digits.
Economists’ Expectations and the Impact on Bitcoin
Prominent economists, including Mohammed El-Erian, anticipate that the Federal Open Market Committee (FOMC) will maintain the interest rates at 4.50%.
A pause in interest rate changes would not be surprising. Officials have hinted at this several times since the December meeting when they reduced rates by 0.25%. The accompanying dot plot suggested just two cuts this year, a decrease from the previous guidance of four.
Therefore, the initial rate decision is likely to have a minor effect on Bitcoin and altcoin prices. Jerome Powell’s statement about what to expect later in the year will be the main driver.
Bitcoin Price Risks Ahead of Fed Decision
There’s a risk that Bitcoin’s price will decline post the FOMC decision due to a double-top pattern on the daily chart. This pattern comprises two identical peaks, which in this case are at $108,180, and a neckline at $88,913. Assets often experience a bearish breakout after forming a double-top pattern.
Another risk is that Bitcoin has formed a bearish divergence pattern on the daily chart. This is shown by the Money Flow Index, Relative Strength Index, and MACD indicators, which have been declining since November.
Therefore, a combination of a double-top pattern, bearish divergence, and a hawkish Fed suggests that Bitcoin may decline following the FOMC statement. Such a drop could push it down to the neckline at $88,913.
A bearish breakdown in Bitcoin will likely lead to further downside for altcoins like Ethereum, Solana, and Polkadot. On the other hand, if Bitcoin jumps to a new all-time high, these altcoins may rebound.
