Bitcoin (BTC) and the wider cryptocurrency market fell under as equities markets pulled back at the closing bell after minutes from the Federal Reserve's December FOMC meeting showed that the regulator is committed to decreasing its balance sheet and increasing interest rates in 2022.
As stock markets corrected, BTC price followed suit by dropping below $44,000, setting off a cascade of liquidations that reached $222 million in less than an hour.
Data from Cointelegraph Markets Pro and TradingView shows that after oscillating around support at $46,000 for the past couple of days, Bitcoin was hit with a wave of selling that pulled the price to an intraday low of $43,717.
Based on the current situation, it is widely expected that the Fed will begin raising its benchmark interest rate in March, “which would mean that balance sheet reduction could start before summer.”
Here’s a look at what crypto analysts are saying about the latest Bitcoin price drop in BTC and what could be in store in the weeks ahead as the easy money policies of the Fed come to an end and interest rates start to rise.
Ethereum’s native token, Ether (ETH), plunged sharply hours after the United States Federal Reserve released the minutes of its December meeting, showing that it eyes a faster timetable for hiking interest rates in 2022.
The minutes showed that the Federal Open Market Committee (FOMC) is in favor of raising short-term rates “sooner or at a faster pace than participants had earlier anticipated.” According to the CME Group, trading in the interest-rate futures market showed a two-thirds possibility of the first increase in March.
Ether turned lower after the minutes were released, dropping by over 13.50% to as low as $3,300. Its plunge mirrored similar downside moves across the crypto market, with Bitcoin (BTC) shedding a little over 9% to nearly $42,100.
Incontestably, ETH/USD returned more losses to its investors than BTC/USD after the Fed’s announcement.
It appears traders decided to unwind tokens sitting atop better long-term profits than Bitcoin. For instance, Ether’s returns in the last 12 months — even after the Fed-led drop — came out to be around 175%. On the other hand, Bitcoin’s profits were nearly 15.75% in the same period.
A key Bitcoin (BTC) metric has just reached its lowest levels since the months after the March 2020 market crash.
As noted by popular analysts on Jan. 5, Bitcoin’s relative strength index (RSI) is printing a “hidden bullish divergence” on monthly timeframes — and if it plays out, they say, the result will be very pleasing for hodlers.
RSI falls below summer 2021 floor
Amid frustration at the lack of direction on BTC/USD, it is no secret that a host of on-chain indicators has long demanded higher price levels.
The current $46,000 may slide further, but the classic RSI metric now shows just how comparatively “oversold” Bitcoin is at that price.
“Bitcoin monthly RSI is currently lower than the May–July 2021 correction,” popular analyst Matthew Hyland revealed, referring to Bitcoin’s summer correction after the May miner upheaval.
Whereas that period sent BTC/USD to $30,000 and monthly RSI to around 60, now, the price is higher but RSI lower — just 58.95. The metric was lower only in September 2020, with BTC/USD at around $10,000.
Along with the one-month lows, monthly RSI is additionally printing a pattern that has only been observed once before, fellow trader and analyst TechDev responded.
“Only been one other hidden monthly bull dive in Bitcoin’s history I could find. Let’s see if it confirms,” he wrote.
RSI is traditionally used to determine how overbought or oversold an asset is at a given price point and has served Bitcoin particularly well in recent months.
In mid-October, for example, RSI was at 68, TechDev noted that that level was still far from the point at which Bitcoin hits long-term price tops.
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