Bitcoin Is in “Slow-Crawl” Mode but It’s All About to Change
Gearing Up for Major Volatility: Fed Chair Powell Due to Speak at Jackson Hole
Exactly one week ago, Bitcoin had one of its worst days since June: it dropped from $23,200 to $20,785 on fears that the Fed will continue to tighten its policy. Today, Federal Reserve Chairman Powell will speak about the economic outlook at the Jackson Hole Symposium and during his address, he will likely reveal what the Fed’s next move will be.
Several Fed members have expressed their support for another 75 bps rate hike and as long as the interest rate is going up, it will be difficult for Bitcoin to make significant advances. Cryptocurrencies are considered risk assets and usually drop when the central bank adopts a tight monetary policy (aka rate hikes).
If today, during the Jackson Hole Symposium, Fed Chair Powell will confirm his colleagues’ view and will adopt a hawkish stance (more hikes to follow), then we will probably see Bitcoin take a nosedive together with altcoins. On the other hand, if he hints that the pace of the rate hikes will slow down, the cryptocurrency market is likely to push higher.
However, there is a third option: it’s possible that future rate hikes are already priced in by market participants. This would mean that even if today the Fed Chairman is hawkish, the market will have a muted reaction because the big move already occurred last week.
The speech is scheduled for 2:00 pm GMT but before that, the Core PCE Price Index will be released. The index is a measure of inflation that shows changes in the price of goods and services purchased by individuals. Together with the CPI, it paints an accurate picture of inflation in the U.S., it affects the Fed’s interest rate decisions and has a strong impact on the US Dollar and consequently on the crypto market. The release is scheduled for 12:30 pm GMT.
Technical Outlook – BTC/USD
After the sharp drop that occurred on August 19, the pair started to crawl along the bullish trend line seen on the chart below. Volatility remained low for the entire week, price action was range-bound, and it looks like most market participants are waiting to see what the Jackson Hole Symposium has to offer.
The next direction will likely be determined by Powell’s speech and by the inflation data that’s coming out today. Right now the pair is in limbo and in a state where anything can happen; in other words, it could burst out to either side but also, the initial break could be a fake one. In my opinion, the best course of action is to wait until after the PCE Index comes out and Chairman Powell delivers his speech.
