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Forecast Future Price Action

Bitcoin Breaks Out Above Cost-Basis Ahead of Fed Rate Decision


The world’s largest cryptocurrency, Bitcoin (BTC -0.26%), continues to hover around the all-time high of $23,000, having declined less than 1% over the past 24 hours to $23,250.[0] Last week saw a total of $117 million flow into digital-asset investment products, with nearly all of it going into funds related to Bitcoin.[1]

On Sunday evening, the value of bitcoin jumped by 3% to a peak of $23,955, before dropping back to around $23,300 on Monday.[2] As of press time, it is trading at $22,883 with a market cap of $441 billion, having given a breakout on all three realized prices for the first time in three years.[3]

At 2 pm Eastern Standard Time (EST) on Wednesday, February 1st, 2023, the Federal Reserve’s interest rate adjustment will be revealed, and the world will be paying close attention.[4] The announcement of the new rate is scheduled for 2 p.m.[5] Wednesday, Feb. 1 at ET.[4] The CME has estimated a likelihood of 99.9% that interest rates will be raised by 25 basis points, from 4.5% to 4.75%.[5] Interest rate futures indicate that the Federal Reserve’s current rate increase period could conclude in June.[5]

On Friday, two major upturns occurred in the Bitcoin rally that began in early 2023.[6] Patterns in the crypto options market suggest another jump could come, with the cryptocurrency up more than 40% in four weeks and the BTC/USD reaching highs of $23,955 last week.[6]

The recent surge in Bitcoin price action has resulted in an initial breakout above all three cost-basis for the first time since the 2018/19 bear market and the March 2020 Covid crisis.[3] If prices remain above these key psychological levels for a prolonged period of time, it would be considered a positive sign.[3] Additionally, Ethereum developers had on Monday deployed the shadow fork ahead of the Shanghai hard fork due in March 2023.[7]

The initial assumption is that the Federal Reserve will raise interest rates by a quarter of a percent and declare that further increases are necessary.[8] As a result, any increase beyond this should be beneficial for the dollar and detrimental for Bitcoin.[8] Should the Federal Reserve deliver as anticipated, a short-term surge powered by hype could push Bitcoin past $25.4k.[5]

0. “Why Bitcoin, Ethereum, and Solana Are Down This Morning” The Motley Fool, 30 Jan. 2023, https://www.fool.com/investing/2023/01/30/why-bitcoin-ethereum-and-solana-are-down-this-morn/

1. “Crypto Markets Today: Bitcoin Dips Below $23K Ahead of Fed’s Meeting” Yahoo Finance, 30 Jan. 2023, https://finance.yahoo.com/news/crypto-markets-today-bitcoin-dips-222615293.html

2. “Cryptos Falter But Market Cap Holds Above $1 Trillion” RTTNews, 25 Jan. 2023, https://www.rttnews.com/3339236/cryptos-falter-but-market-cap-holds-above-1-trillion.aspx

3. “Bullish for Bitcoin and the whole industry: GDP rises 2.9% in fourth quarter – This is yet to come” Crypto News Flash, 27 Jan. 2023, https://www.crypto-news-flash.com/bullish-for-bitcoin-and-the-whole-industry-gdp-rises-2-9-in-fourth-quarter-this-is-yet-to-come

4. “Bitcoin And Crypto This Week: Here’s What Will Be Important” Bitcoinist, 30 Jan. 2023, https://bitcoinist.com/bitcoin-crypto-this-week-what-will-be-important/

5. “FOMC: How Will Bitcoin React to a 25 BPS Hike?” Watcher Guru, 30 Jan. 2023, https://watcher.guru/news/fomc-how-will-bitcoin-react-to-a-25-bps-hike

6. “Bitcoin Price Holds at $23,000 as Crypto Traders Brace for Fed Decision” Barron’s, 30 Jan. 2023, https://www.barrons.com/articles/bitcoin-ethereum-price-crypto-markets-today-51675074760

7. “Cryptocurrencies Stay Bullish As Bitcoin Heads for $25000, Ahead of FED Meeting” FX Leaders, 30 Jan. 2023, https://www.fxleaders.com/news/2023/01/30/cryptocurrencies-stay-bullish-as-bitcoin-heads-for-25000-ahead-of-fed-meeting/

8. “The Federal Reserve meeting looms large as the Fed’s hawkishness may send Bitcoin lower.” CoinJournal, 30 Jan. 2023, https://coinjournal.net/news/4-bearish-factors-for-bitcoin-this-week/

Forecast Future Price Action
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