Bitcoin (BTC) retreated and reversed its daily gains after the Federal Reserve announced its third consecutive interest rate hike of 75 basis points (bps) on September 21.
Merchants sold the news
BTC price is down about 6.5% from the intraday high at $19,950, reaching 18,660 minutes after the FOMC statement. Its decline reflected a similar abrupt correction in the US stock market, with the S&P 500 down 0.5% minutes after the Fed’s update.
BTC/USD daily price chart. Source: TradingView
On the other hand, the 10-year US Treasury yield rose to 3.6% after the Fed’s announcement versus 3.56% five minutes before it. Similarly, the yield on the two-year Treasury rose from 3.98% to 4% in the same time frame.
The US Dollar Index (DXY), which measures the dollar’s strength against a basket of major foreign currencies, rose to 111.57 for the first time in 20 years.
The Fed also published an updated “point chart,” which aligns with its officials’ individual interest rate projections by the end of 2025. These projections point to additional rate increases going forward, with the 2022 target reaching 4.4% and the 2023 target at 4.6%. .
Central bank officials also predicted that the interest rate would peak at 4.6% in 2023. After that, it would drop to 3.9% in 2024, followed by another drop to 2.9% in 2025.
All metrics point to more pain for Bitcoin
The rise of the dollar and the decline of bitcoin after the Fed update reflected investors’ increased appetite for cash and cash-based instruments compared to riskier assets. Meanwhile, the central bank’s dot chart hinted that investor sentiment would remain unchanged until the end of 2023.
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Bitcoin price could continue to suffer due to the Fed’s hawkish stance and its attempts to bring down inflation from the current 8.3% level. After the central bank update, several analysts indicated that the price of BTC could fall below the current technical support range of $18,000-$20,000, given that the Fed may raise interest rates by another 75 basis points before the end of the year.
The technical outlook for Bitcoin looked similarly bearish. Notably, the cryptocurrency has been forming a bearish reversal pattern dubbed “Head and Shoulders,” with a profit target of around $14,000, as shown below.
BTC/USD daily price chart. Source: TradingView
On the contrary, a rebound from the head and shoulders support level at $18,800 could make Bitcoin look towards $22,500 as a temporary bullish target.
