Bitcoin (BTC) and Ethereum (ETH), two of the largest cryptocurrencies in the world, continue to hold above the $24,000 and $1,600 levels, respectively. However, they experienced a small drop this morning, with Bitcoin falling from $25,000 to $24,000.
The crypto market continues to fluctuate, with investors keeping a close eye on the upcoming minutes of the Federal Open Market Committee (FOMC) meeting due to be released this week.
The recent downward trend in cryptocurrency prices can be attributed to positive economic data coming out of the United States. This reinforced the belief that the Federal Reserve will continue its plan to tighten monetary policy for a longer period than previously expected.
Additionally, traders appear to be wary of large investments ahead of the release of Coinbase’s results and Hong Kong’s new VASP licensing scheme, both of which are expected to have a significant impact on the market in the coming weeks.
How could Wednesday’s release of FOMC meeting minutes affect cryptocurrency prices?
The publication of the minutes of the Federal Open Market Committee (FOMC) on Wednesday may affect the price of Bitcoin. Since the FOMC sets monetary policy in the United States, any hint of a change in that policy could affect financial markets, including the cryptocurrency market.
In a recent speech at the Economic Club of Washington, Federal Reserve Chairman Jerome Powell discussed the ongoing process of deflation and expressed confidence in the Fed’s ability to reduce inflation to its 2% target.
While Powell’s reaction to January’s strong jobs report did not indicate a change in the central bank’s approach to future rate hikes, he warned that sustained strong labor data could lead to a higher terminal level of Fed funds.
At its February 2023 meeting, the Federal Reserve raised the target range for the reserve funds rate by 25 basis points, now between 4.5% and 4.75%. This is the second meeting in a row where the size of the increase has been scaled back, although borrowing costs are now at their highest level since 2007.
Bitcoin traders and investors will be watching the FOMC minutes closely for any signs of inflationary concerns or changes in interest rates that could potentially affect the price of Bitcoin.
Examining minor dips in the cryptocurrency market
The global cryptocurrency market has been performing well in recent days, but there has been a slight decline over the past 24 hours. At the time of writing, the total market cap was $1.11 trillion, representing a 0.68% drop in value.
The market’s inactivity may be due to the fact that the United States is celebrating President’s Day, which may make traders cautious about placing any significant bets. As a result, Bitcoin also fell slightly in value compared to the previous day.
Meanwhile, Ether has also seen a drop in the last 24 hours, probably for the same reason. As a result, other prominent cryptocurrencies such as Dogecoin (DOGE), Litecoin (LTC) and Ripple (XRP) also suffered minor losses.
Could a strong US dollar undermine cryptocurrency? Analysis of the relationship between the US dollar and digital assets
The U.S. dollar rose sharply and is showing strength across the board on positive U.S. economic data that defied expectations for a prolonged period of tightening by the Federal Reserve.
The market expects that interest rates will need to rise due to the latest statistics from the world’s largest economy, which point to a tight labor market, persistent inflation, strong growth in retail sales and higher monthly producer prices.
Market forecasts indicate that the Fed rate is expected to peak just below 5.3% by July. The US dollar strengthened on a hostile outlook from members of the Fed, who believe that higher interest rates will be needed to successfully fight inflation.
As such, a strong US dollar is seen as a major factor driving down the value of cryptocurrencies, including Bitcoin (BTC) and Ethereum (ETH).
Bitcoin price
Looking at Bitcoin from a technical perspective, it was trading sideways and maintaining a narrow range between $23,700 and $25,200. The immediate resistance level for the BTC/USD pair is currently $25,200, and if the price breaks above this level, it could potentially reach the $26,000 mark.
However, leading technical indicators including RSI and MACD are showing divergence. The RSI is now above 50 in the buy zone, while the MACD is forming histograms below 0 in the sell zone. This type of divergence is often indicative of investor indecision.
If Bitcoin price breaks below the current support level of $23,750, the next support level will be at $22,850, which is defined by the 50% Fibonacci retracement.
Next week, the focus will be on the minutes of the FOMC meeting, which is scheduled to be released on Wednesday. These minutes can potentially affect the price action of Bitcoin.
Ethereum price
The ETH/USD pair saw bullish momentum build after finding support near the $1,650 level. On the 2-hour timeframe, Ethereum has formed a symmetrical triangle, indicating indecision in the market and keeping the price of ETH in the swing.
If Ethereum breaks above the $1,650 level, it could potentially reach the $1,720 mark. In addition, a bullish breakout above the $1,720 level and a symmetrical triangle could cause the price to rise further. In either scenario, the $1,760 and $1,800 price levels are likely to be resistance levels.
On the other hand, Ethereum’s support level is around $1,650 or $1,625. The RSI and MACD show divergences, comparable to Bitcoin price analysis.
This indicates that investors may be waiting for a major news event, such as the release of the FOMC meeting minutes, to determine the market’s next trends.
