Bitcoin price has returned to sideways action after a massive rally from the yearly lows around $16,400. Cryptocurrencies have been trending upward on favorable macroeconomic headwinds, but uncertainty remains king and could hinder bullish momentum.
Bitcoin Vs. Pow-Pow, A Bull-Run In The Making
At this writing, the price of Bitcoin is hovering around the $23,000 level as the market holds its breath for the upcoming interview with US Federal Reserve (Fed) Chairman Jerome Powell. The interview will come out today and may provide insight into the financial institution’s assessment of the current situation.
Crypto markets and risk assets, such as stocks, have been trending downward since 2022 as the Fed has raised interest rates to reduce inflation. Currently, the market believes that financial institutions will change their monetary policy.
Market participants expect Powell and the Fed to change course to prevent the US economy from entering a recession. Recent inflation data suggests the metric is trending downward. These two factors are behind the recent Bitcoin and crypto rally.
Last week, during the Federal Open Market Committee (FOMC), the Chairman of the Fed is expected to come out “hawkish,” emphasizing his view that the market should see “pain,” as it did in December 2022. However, Powell gave the market more leeway and hinted at a slowdown the Fed’s interest rate hike.
According to a report from QCP Capital’s trading desk, during today’s interview, Powell could “shake things up.” If the Fed gives a hawkish statement to offset the FOMC last week, the market could see some downside volatility.
Today’s sideways price action reflects the high expectations of market participants. On a positive note, Powell’s statement may provide some clarity. QCP Capital noted:
Hopefully tomorrow’s interview will clear things up for everyone – especially his views on the financial situation, and whether he thinks this rally is lost. (…) it seems that inflation actually fell faster than the FOMC forecast in December, compared to expectations that were in line with the projection.
In addition, Bitcoin investors should monitor the upcoming print of the Consumer Price Index (CPI), a proxy for measuring inflation. If the exit metrics are higher than expected, BTC’s bullish momentum could close in the short term. Trading desk added:
Post Powell, all eyes will quickly move to the CPI on Feb 14, barring unforeseen outliers in the inflation expectations number this Monday. Will we see a Valentine’s Day massacre or another weak print redemption?
QCP Capital believes that US unemployment must rise above 4%, along with a low CPI, to see the Fed pivot its policies in 2023. Otherwise, financial institutions will continue to bring more pain to Bitcoin investors.