FOMC Tackles Bitcoin’s ‘Danger Zone’: 5 Key Updates

Bitcoin is starting a new week in recovery mode after a volatile weekend that led to heavy losses. The price of BTC is struggling to reach its previous all-time highs due to sustained selling pressure. This week, there is anticipation for cues from the United States Federal Reserve as both cryptocurrency and risk assets await signals. The battle against inflation continues, and recent data suggests that inflationary forces are still present. Reclaiming a critical zone is essential for BTC price discovery to continue. Bitcoin is also approaching its next block subsidy halving, which may lead to a retracement similar to previous halvings.

Over the weekend, Bitcoin dropped to its lowest levels since March 6, but it has since experienced a solid recovery. It has been unable to surpass its previous all-time highs from 2021. Analysts suggest that Bitcoin needs to reclaim its 21-period exponential moving average (EMA) on the 4-hour chart and have a relative strength index (RSI) reading above 50 for a bullish confirmation. The selling pressure over the weekend was intense despite the absence of institutional trading. One theory is that a hedge fund with a long BTC position and a short position on MicroStrategy stock had to sell BTC to cover its losses.

Despite the setback, Bitcoin managed to have its second-highest weekly close ever. Liquidity on exchanges decreased during the market flush, with over $300 million in long liquidations. Funding rates and open interest also reset, indicating a more balanced market sentiment. As Bitcoin approaches its halving, which will reduce block subsidies, there is anticipation for a “pre-halving retrace” in line with previous halvings.

This week, all eyes are on the United States Federal Reserve as it makes decisions on interest rates. Chair Jerome Powell’s commentary will be closely watched for cues on future policy moves. The market sentiment gauge indicates extreme greed, but long-term holders are taking profits by selling their coins. This selling trend is partly attributed to the Grayscale Bitcoin Trust and increased selling by Bitcoin miners.

Bitcoin is facing challenges in reclaiming its previous all-time highs due to sustained selling pressure. The market is awaiting cues from the Federal Reserve, and the upcoming halving could lead to a retracement. Despite these challenges, sentiment remains in the extreme greed zone, but long-term holders are taking profits.