Bitcoin’s relief rise saw it trade near $39,000, was short-lived. The most valuable virtual currency by market valuation has dropped below $37,000 once again. This happened after the Federal Reserve of the United States said on Wednesday that it would be reducing its balance sheet.
At the time of posting, Bitcoin (BTC) was trading at around $35,981.97. Bitcoin has dropped 4.56 percent in the last 24 hours, according to CoinDesk data. Around the same time, Ether, the second most valuable cryptocurrency by market capitalization, was trading at around $2,397.99. This was a decrease of about 3.62 percent.
According to CoinDesk, the amount of bitcoin spot trading on major crypto exchanges increased on Wednesday as opposed to the day before.
Bitcoin temporarily increased to roughly $39,000 after the Federal Reserve of the United States issued its announcement. This is because the market assumed the news had already been priced in.
As investors and traders interpreted Fed Chairman Jerome Powell’s speech, Bitcoin gave up its previous gains. It then started to follow the same patterns as the stock market. Powell stated that raising interest rates at a future meeting is not out of the question. In order to combat excessive inflation, he hinted that the central bank will gradually withdraw assistance for the economy.
In his daily market newsletter, Edward Moya, a top market analyst at Oanda, stated that after listening to Fed Chair Powell speak, it seemed evident the possibility of future interest rate increases had increased. The Fed might increase premiums every other meeting, with the balance-sheet runoff beginning in May or June.
However, according to Moya, the selling pressure of cryptocurrencies may be nearing its end. If bitcoin can stabilize between $40,000 and $50,000, an increase in altcoins could be on the way.
Bitcoin’s Way Forward
According to experts, Bitcoin has risen from extremely oversold levels in the last two days. This shows that after a big sell-off, buyers are returning. Initial resistance for the cryptocurrency is between $40,000 and $43,000. This might halt the current Bitcoin price rise.
On the daily chart, the Relative Strength Index (RSI) is recovering from extreme oversold levels. This may keep buyers interested this week. The RSI is entering the oversold area on the weekly chart, similar to the situation last July, which was a precursor to a significant price rise.
Still, trend signals are weak, implying that there is limited potential from here. To mark a recovery phase, buyers will need to make a clear move above $40,000.
For the time being, the November decline holds, with close support at $37,000 and lower support at $30,000.
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