The current sideways price movement of Bitcoin (BTC) has left investors wondering what the future holds for the world’s largest cryptocurrency. Upcoming interest rate hikes by the Federal Reserve (Fed) could pose the next big challenge for bitcoin, according To the cryptocurrency market analysis firm Blofin Academy.
Is Bitcoin ready for higher interest rates?
The US economy has shown great resilience in recent months, prompting the Federal Reserve to consider raising interest rates to prevent inflation. However, this could be bad news for the cryptocurrency market, as higher interest rates tend to make traditional investments more attractive, which could lead to lower demand for bitcoin and other cryptocurrencies.
The correlation between interest rates and Bitcoin price movement has been observed in the past. When interest rates rise, investors tend to shift their money to traditional investment vehicles such as stocks and bonds, which leads to lower demand for cryptocurrencies.
However, it should be noted that Bitcoin is often seen as a hedge against inflation, which means that it can still have some traction for investors during times of economic uncertainty.
The next meeting of the Federal Reserve is scheduled for June 14, 2023, during which the central bank is likely to discuss the possibility of raising interest rates in response to the current state of the US economy.
Macro limiters leave cryptocurrency traders waiting
Owned by Noelle Acheson, owner of the “Crypto Is Macro Now” newsletter to caution Against investors who are piling up in the cryptocurrency market at this time. While the potential for Bitcoin’s rally remains significant, Acheson points out that there is currently no compelling reason for investors to take additional risks.
According to Atchison, there are a few macro determinants right now, such as debt limit negotiations and Federal Reserve rate policy, that cause investors to wait for more clarity before making any major investment decisions. As a result, there is a sense of caution in the market as traders wait to see how these macro factors play out.
Despite the lack of clarity, Acheson notes that there is little reason for existing cryptocurrency owners to sell their holdings. This indicates that the current wait-and-watch period is not necessarily a sign of a downtrend in the market, but rather a period of caution as investors wait for more information.
Acheson also notes that there could be some downward movement in the near term, but the belief in the upside potential is not strong enough to justify the possibility of losing any potential gains. As a result, there was some buying and selling in the market, but not enough to significantly increase volatility despite lower volumes and liquidity.
At the time of writing, Bitcoin is trading at $26,700, reflecting an increase of 1.2% over the past 24 hours. However, the 50-day moving average (MA) has placed the largest cryptocurrency in a tight range between $26,200 and $26,800. This means that Bitcoin may struggle to break out of its current trading range in the near-term, as the 50-day EMA is currently at the upper end of that range on the 1-hour chart, making it a difficult level to break through.
While Bitcoin has seen some bullish moves in recent weeks, the current trading range suggests that further gains may be limited until there is a significant shift in market sentiment or a bullish catalyst emerges.
Featured image from iStock, chart from TradingView.com