In the week from September 19 to September 25, Bitcoin was trading sideways between the levels of $18.1-19.9 thousand. Sharp downward impulses were observed on Monday, September 19, and Wednesday, September 21. In the first half of the week, all markets remained unsettled in anticipation of the results of the US Federal Reserve meeting on interest rates.
On September 21, following the meeting, the Fed raised the rate for the third time in a row by 75 basis points, to 3.00%-3.25% per annum. The Fed’s decision was expected in the markets, while the dollar index hit a new high after Jerome Powell’s speech. Powell focused on fighting inflation to curb it, and while traders took his speech as a signal to continue raising rates by 75 basis points until inflation begins to decline.
Traders expect the remaining two Fed meetings in 2022 to raise rates by 1.25 percentage points to 4.5%. The market is currently accounting for a 75 basis point rate hike on November 2 with a 72.9% chance.
After the Fed meeting, the Bitcoin rate fell from the upper limit of the price range of $19.9 thousand to $18.1 thousand, forming the lower limit as market participants sold off risky assets in response to the Fed’s rate hike. On Thursday and Friday, the price was in the range of Wednesday. Buyers defended the $18-19 thousand support level, while there is no certainty that they will be able to hold back sellers for a long time.
Since the Cryptocurrency market correlates with stock indices, Bitcoin also sank. The dollar index rose to 113.22 points. The S&P500 fell 1.71%, and the Nasdaq fell 1.80%.
It is possible that the dollar is now being pushed up not by expectations of a rate hike by the Fed, but by the collapse of the British pound and the euro. Rising energy prices hit Europe’s largest economy, and companies faced downsizing.
High inflation threatens the EU economy. The ECB was late in raising rates and fighting inflation, so due to rising electricity prices and gas shortages, not all businesses will survive the winter. The situation is similar in Britain. The German economy is on the verge of recession. For the 1st quarter, GDP growth in the eurozone amounted to 5.4%, and for the 2nd quarter – 4.1%. Consumer inflation in the euro area jumped to 9.1% from 5.0% per annum, industrial – by 37%. Industrial production and business activity fell to their lowest levels since the beginning of the year.
Next week expectations
No important data comes out next week, but we should pay attention to the speech of the head of the US Federal Reserve, J. Powell, on September 27th.
Buyers need to go through $20.5 thousand in Bitcoin and gain a foothold above $21 thousand. If trading for the week closes above $19.5 thousand, then the weekly candle will look like a pinbar. Buyers need to hold on until the end of the month until the growth phase for US indices begins. The worst-case scenario for buyers is a retreat of Bitcoin to the level of $15 000.
Recently, we have seen a slight decrease in correlation with the S&P index. While the S&P plummeted by 5%, Bitcoin remained flat. Next week, the S&P rally is waiting for us, which is likely to be reflected in a slight increase within the $20.5 thousand zone. After that, we probably should be ready for a retest of the $17.5 thousand zone.
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