FX.co ★ Completion of correction or new local bottom: what does the preservation of Fed's key rate mean for Bitcoin?

The cryptocurrency market and the U.S. stock markets froze in quivering anticipation of the results of the FOMC meeting. Before January 27, the main indices showed moderate growth, which indicated that the market accepted the current situation. Everyone was ready to raise the rate and curtail the stimulus program. But before the Fed meeting, all markets held their breath and Chairman Jerome Powell did not let them down.

The U.S. Federal Reserve announced that it would leave the key rate at 0.00-0.25%. As expected, the Fed ends its asset buyback program and monthly reduction in bond purchases in March 2022. The key rate is planned to be raised in the near future to reduce inflation. Powell also noted that the coronavirus is significantly slowing down the growth rate of the U.S. economy.

In general, the first Fed meeting in 2022 ended calmly. The main theses were expected, and therefore the reaction of the market was moderate and included in the price of the indices. For the cryptocurrency market, the first meeting of the Fed confirmed the positive dynamics in the process of implementing the industry into the global financial system. Bitcoin acts as a kind of "ambassador" of the digital asset market and is the first among cryptocurrencies to be fully introduced into the global financial system. This is evidenced by a record correlation between the asset and the NASDAQ index at 95%.

Whether this is good or bad is hard to say. But an increase in correlation with classical indices will increase the investment attractiveness of bitcoin and its reputation among large hedge funds. At the same time, this will undoubtedly lead to tightening of state regulation of the cryptocurrency industry and Bitcoin already in 2022. But it seems that bitcoin is able to benefit from this more than harm.

The same opinion is shared by the founder of SkyBridge Capital. According to the entrepreneur, the BTC ecosystem continues to evolve despite the decline in market dominance and the emergence of new competitive assets (ADA, SOL, BNB). Scaramucci is confident that by 2024 the number of Bitcoin users will grow to 1 billion.

The neutrally perceived news did not become a panacea for the decline in BTC/USD quotes and the entire cryptocurrency market. On January 27, bitcoin fell by 4%, and the total market capitalization decreased by 3% to $1.65 trillion. As before, the main reason for the fall was the unsuccessful retest of the $39k-$40k Bitcoin mirror level. The coin touched the mark, but the sellers immediately began to push the price down, which formed a long upper wick. In the $39k-$40k area, there is a downward trend line, 30 EMA and concentration of sell orders. So a failed $39k-$30k retest looks to be expected.

It should be stated that, despite the successful collection of liquidity in the $32k-$35k region, we are waiting for a second sinking to the bottom. Current volumes are not enough to move and break through the downward trend area, and therefore a re-collection of liquidity is necessary. I still consider $30.5k-$32k to be the final point, but I do not rule out a decline below $30k, where you can potentially drop to $25k. But this option is possible with a confident breakdown of the level of the previous local bottom of January 1, 2021 at $28.7k.

So far, bitcoin is moving flat as part of local accumulation, and we can expect one more stake before retesting the local bottom. This is evidenced by technical indicators, and therefore we have temporary accumulation until the opening of the U.S. session, where another assault on the $39k-$40k area will take place.