Bitcoin (BTC) was roughly flat at $39,000 on May 4, as the US Federal Reserve adjusted to expectations of a key interest rate hike of 0.5%.
Bitcoin Eerily Calms After Fed Statement
Data from Cointelegraph Markets Pro and TradingView showed that the BTC/USD pair showed minimal fluctuation as the Fed confirmed what many assumed had already been “priced in” in the markets.
Unlike previous statements from the Federal Open Markets Committee (FOMC), the May 4 statement did not cause major volatility in cryptocurrency markets. The most traders had to deal with was a brief rally below $39,500.
At press time, Bitcoin was trading at similar levels throughout the day.
“With an appropriate firmness in the direction of monetary policy, the Committee expects inflation to return to its 2% target and the labor market to remain strong,” the FOMC confirmed in an official statement.
“In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent and anticipates that continued increases in the target range will be appropriate. In addition, the Committee decided to begin lowering its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1, as described in the Plans for Reducing the Size of the Federal Reserve Balance Sheet that were released in conjunction with this statement.”
However, the margin for volatility remained as Fed Chairman Jerome Powell had not yet commented an hour after the release of the statement.
Anticipating Powell’s comments, on-chain analysis resource Material Indicators argued that it was still not worth being long BTC on the shorter time frames.
Giving the #BTC trend the benefit of all doubts here, but note that prior bull reversals had higher bid volume and depth then we have now. If you are long, you either need a looooong term view or a tight stop. Powell speaks in 30 mins. #MayThe4thBeWithYou https://t.co/VzE3V2kA8Q pic.twitter.com/sp1kqDRBrz
— Material Indicators (@MI_Algos) May 4, 2022
Stocks, with which cryptocurrencies continue to show considerable correlation, were in a buoyant mood amid the lack of any surprise moves from the Fed.
The S&P 500 has posted a modest rebound and is up 0.4% at time of writing, while the Nasdaq 100 has gained a modest 0.2%.
“The Fed raises rates with 0.50%, but also starts the quantitative tightening (QT) from June 1. Everything as expected, the QT starts a little later. The real event was already priced in”, added Cointelegraph contributor Michaël van de Poppe in part of the Twitter comments.
“Squeeze until something breaks”
Others were less comfortable with the Fed’s trajectory.
Analyzing the implications of the rate hike, economist Lyn Alden hinted that the risks were for a new moment of crisis in which the hikes would carry serious risks of their own.
All of this is subject to adjustment based on economic and financial conditions.
Tighten until something breaks, basically.
— Lyn Alden (@LynAldenContact) May 4, 2022
Regarding inflation, Alden added that the world has the “greatest disconnect” between inflation levels and key central bank rates since the time of World War II.
The outlook for Bitcoin, as reported by Cointelegraph, remains skewed to the downside ahead of a recovery later as stocks suffer from the Fed tightening.
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