How did the crypto-market react to new Fed Chair’s first FOMC meeting?
21Shares was bullish on the potential BTC recovery to $100K in Q3.
The Bitcoin [BTC] price has dropped about 4% to $64K following the hawkish Fed rate decision on the 17th of June. The pullback dragged the entire crypto market lower.
Notably, the inaugural decision under the new Fed chair, Kevin Warsh, maintained the interest rate at 3.5%-3.75%, citing sticky inflation.
Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy.
In fact, the so-called ‘dot plot’ showed that half of the Fed’s board of governors favored at least one interest rate hike this year. In other words, this meant possible rate hikes and relatively expensive loans. Such a forecast typically dents risk sentiment, and crypto’s pullback painted investors as repriced.
What’s next for the crypto market?
The price dip on the 17th of June effectively reinforced the local top for the recent relief bounce.
As of press time, BTC was on track to mark the third day in the red. This could open the possibility of dropping back to the $62K-$60K support that had stopped the recent corrections.
Similarly, Ethereum [ETH] dropped 2% on the 17th of June, bringing its recent losses to over 6%.
On the other hand, XRP also slipped by 2.5% and traded at $1.17, bringing its pullback to 8%. For Hyperliqid [HYPE], the altcoin lost 3% but had already recovered as of writing and traded at $71. Overall, about $450M worth of positions were liquidated in the past 24 hours.
Worth pointing out that the sell-off wasn’t limited to crypto; U.S. equity markets also closed lower. Yet ahead of the 18th of June open, stocks showed a slight rebound. If that trend holds and crypto mirrors it, BTC could recover as well.
In fact, Matt Mena, senior crypto research strategist at 21Shares, told AMBCrypto that the interest pause was ‘fully expected.’ According to him, BTC was ‘structurally well-positioned’ to eye the $100K level again in Q3 after consolidating in the near term.
With eyes now on $70k, Bitcoin’s next resistance level, if we are able to break through $70k with strength, we are primed to retest $75k and target $80k again as we did in May – setting us up to end Q3 at the coveted $100k level.
Notably, if the 4-year cycle holds, BTC is also expected to bottom around Q3 or Q4 and officially kick off the next bull run phase.
In the short term, though, sophisticated players were actively hedging against a potential dip to $62K and $60K, as shown by the top put volumes (bearish bets, red bars).
Overall, despite the hawkish Fed rate decision and subsequent sell-off, the market expected BTC to bottom at $62K-$60K again.
Final Summary
- Like the U.S. equity market, the crypto market also slipped lower on Wednesday following the hawkish Fed rate decision
- Still, there were expectations of a short-term dip around $60K before a potential bounce towards $100K in Q3.
