Investors watched the US with excitement on yesterday’s trading day. The Federal Reserve has announced a rate hike for the last time this year. Fulfillment of analysts’ expectations. Fed Chairman Jerome Powell said interest rates would rise 0.5 percent.
This was exactly in line with analysts’ forecasts. The main interest rate in the US is now in the range of 4.25 and 4.5 percent. This is the highest level in 16 years. In 2006, the Fed raised interest rates as high as 5 percent before cutting interest rates significantly to 0.25 basis points by 2008.
Rate increases may continue at a slower pace in 2023
It is not clear how long the interest rate hikes will continue. Fed Chairman Powell did not want to commit himself to journalists at the press conference, but he emphasized that the determining factor was not the speed of interest rate hikes, but to keep the desired goal in mind.
After several rate hikes of 0.75 basis points this year, the Fed made interest rate hikes very quickly, ending a long zero interest rate policy. With the current increase of just 0.5 basis points, the Fed has already put the brakes on its aggressive course. Analysts are assuming that a further interest rate rise next year will also be more modest and will be between 0.25 and 0.5 basis points.
See Chairman Powell’s statement from the #FOMC press conference:
Opening clip: https://t.co/8v0uOWJHVT
Full video: https://t.co/DFkfmBQ14S
Press conference contents: https://t.co/qCtoFjHVfk
— Federal Reserve (@federalreserve) December 14, 2022
The central bank sees a lot of work still to be done because of inflation
However, the markets did not respond positively to the rate hike and were secretly hoping for an even smaller step. Powell’s statements are especially depressing, as he made it clear that he will not deviate from his line until the 2 percent inflation target is reached. However, there is still a long way to go. Despite the reduced curve, inflation is still more than 7 percent.
Therefore, according to Powell, there is still much to do and we must not give up in our efforts. Alternatively, one would accept the increase in unemployment in the US, as long as this remains within limits.
Falling stock and crypto prices
Buyers of equities and cryptocurrencies must therefore understand that the markets are not expected to ease quickly and that inflation and interest rate hikes are likely to be among the partners for some time.
Accordingly, the tech-heavy S&P 500 stock index, which includes the 500 most valuable listed companies in the US, has fallen more than 3.5 percent since yesterday. There was also a sell-off on the Bitcoin course. After highs around $18,400 before the interest rate decision, BTC/USD has fallen around $1,000 on the day and is trading around $17,400 at the time of publication. This corresponds to a reduction of almost 6 percent.
The hopes of BTC buyers for the end of the year reconciliation after the terrible year 2022 do not seem to be fulfilled. After the positive trend of the last days, when Bitcoin was able to recover from lows of around $15,500 by almost $3,000, many thought enough that the price could regain the $20,000 mark by the end of December.
Bitcoin needs to hold $17,200 to stop a major correction
However, that is not the case at the moment and the decrease could suggest that the lows of the year are being tested again. It doesn’t look like the bear market is over yet. But what does the technical analysis of the chart show about possible price targets until New Year’s Eve? And how do analysts assess the development of Bitcoin in 2023?
The 1 hour mini chart of BTC/USD shows the price moving in an extended rising trend. Trading yesterday, the price was rejected at the upper resistance zone in response to the Fed meeting and has been in a sharp correction ever since. The next support is expected at the $17,200 support line.
It is essential for the price to maintain this level to avoid a major downturn. Because in this case, the technical price target at the starting point of the formation would be around $15,700. Before that, however, there remains a support zone around $15,900, where the price declined several times between November 9 and November 22.
Is the crash to $10,000 yet to come?
The daily chart shows that (yet) the Bitcoin price has not managed to return to an important chart formation. Thus, BTC has been in a descending triangle since June this year. This is a bearish pattern according to technical analysis. In line with this probability, BTC/USD fell below the $18,500 support zone after the November 9 FTX crash.
An attempt yesterday to get back into the chart formation failed. Bitcoin was rejected at former support which is now resistance. So, maybe it was just a confirmation of the correction from the bearish pattern. This would not be a good sign for the further Bitcoin trend. Because the technical price target of the formation could correct the course up to $ 10,370.
This price region has already been identified by many analysts as a potential base for this bear market and the situation remains in place. By the fall of 2020, Bitcoin had begun its bull run from this level to almost $70,000. With the crash to the price level, BTC buyers would see a correction of about 85 percent from the all-time high. Such difficulties have also occurred in bear markets in the past, so such a scenario cannot be ruled out.
Forecast: Bitcoin price 45,000 dollars in 2023
However, the Bitcoin price still has time to return to the descending triangle. By the end of January, BTC could go back into the chart formation and then finally break the resistance to the upside. In this case, the technical price target is around $27,000 depending on the timing of the breakout.
Analysts expect Bitcoin to reach such levels again in the next year and could rise even higher. According to the Digital Coin Price forecast, BTC will rise to $45,000 in 2023. Prices of more than $60,000 are then expected for 2024, before a new high of more than $78,000 should be reached in 2025.
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