Bitcoin’s price growth has been stagnant for five days. After BTC experienced a wild rise from $21,000 to $23,000 last Friday, the price is now in a consolidation phase. The reasons for this are varied.
As reported by NewsBTC, Bitcoin’s Relative Strength Index (RSI) is showing severe overheating on a daily basis. The technical indicator shows that the BTC price is in a very oversold condition.
During the recent upward movement, the daily RSI was at times near 90 but has cooled to 78 at press time. BTC price stalling at $23,000 could signal a healthy consolidation and reset before a new price rally could be on the cards.
Another key factor for Bitcoin price in recent weeks has been its correlation with the US Dollar Index (DXY) and the S&P 500. In general, a weaker dollar is bullish for risk assets like Bitcoin and the S&P 500.
However, the weekly chart of DXY shows that the dollar index is still above its weekly support at 101, which experts consider a very important support level.
If the DXY breaks below this mark, things will be extremely bullish for the Bitcoin price. However, the enthusiasm among risk-averse investors may have been curbed for the time being due to the support that is still in place.
FOMC meeting will be decisive for Bitcoin price
The US central bank’s next FOMC meeting will take place in just over a week on February 1, and will likely set the course for another bull or bear trend.
According to the CME FedWatch tool, 98.2% currently expect the Fed to further reduce the pace of its rate hikes and increase by just 25 basis points. But Fed Chairman Jerome Powell’s statement will also be important.
Thomas Lee of Fundstrat Global Advisors evaluates Inflation has “literally hit the wall” since October and that core inflation is not “sticky,” contrary to the Fed’s initial expectations. According to Lee, bearish sentiment in the stock market in December was triggered by an “unforced error” by the Fed and the FOMC saying inflation was hot in December.
As a result, Fundstrat expects the FOMC to “correct course” in February, meaning financial conditions will loosen and the VIX will fall, which in turn will push risk assets higher.
However, Lance Roberts, chief strategist at RIA Advisors, warns The Fed does not like the current rally in financial markets and will therefore take appropriate action.
The Fed really doesn’t like the markets moving up and easing the financial situation so much. Don’t be surprised if Powell winds up the market again at the next FOMC meeting.
On the other hand, Fed Governor Chris Waller recently came out in favor of a 25 basis point rate hike at the next FOMC meeting, thus bolstering hopes for the February FOMC meeting, as reported by Wall Street Journal aka , “Fed’s Nick Timiraos” for a 25 basis point rate hike for the February FOMC meeting. Mouthpiece.”
As Chief Economics Correspondent wrote Via Twitter, Waller made it clear that the Fed would not make the same risk management mistake it did in 2021 when it stuck to its forecast for persistent disinflation. “It’s different than 2021 because it’s easier for the Fed to cut if it’s wrong,” Waller said.
“In other words, Waller sees the risk of overtightening because inflation comes down quickly as a first-order problem,” Timiraos said.
For the price of Bitcoin, the signal of the upcoming pivot and a 25 basis point increase will be a powerful reason for a new rally. At press time, the BTC price stood at $22,622.
Featured image from iStock, chart from TradingView.com