Bitcoin in a ‘Tricky Spot’ as USD Strengthens on The Fed’s Dovish Tone

Powell said, “We’re a long way from a full recovery” which has gold stuck while the S&P 500 having its steepest drop of 2.6% since October.

For the first time since Friday, Bitcoin dropped back under $30,000 to as low as $29,250 on Wednesday. Today, we are back in the green and around $31k with $10.14 billion in ‘real’ volume.

While we have resistance around $33,000 on the upside, on the downside, Bitcoin has support present at $28,500. Analyst Mati Greenspan, in his daily newsletter Quantum Economics wrote,

“It's a bit of a tricky spot to be in. On one hand, if we break below this level, the next most likely levels of support would be approximately $28,540 and $25,000. However, if we close our positions now, and the price rebounds, then we're in real trouble, as we'd then be forced to buy in at even higher levels.”

The play right now is to hold.


While Bitcoin is stuck in the $29k-$35k range, it can break either way. The good thing is “exuberance has rinsed off the system dramatically,” said trader and economist Alex Kruger, pointing to the funding rates, which were negative for the last couple of days and currently flat between 0.01% and 0.08%, as per Viewbase.

The biggest event this week is the monster 120k Bitcoin options expiry on Friday, but for this to have any effect on the spot prices, the price of the underlying asset Bitcoin needs to rise up.

Fed Remains Dovish

Amidst the red in the Bitcoin market, Federal Reserve Chair Jerome Powell reiterated his dovish call as he made it clear that the central bank isn’t exiting massive support for the economy.

“We have not won this yet,” he said. “We’re a long way from a full recovery.”

The central bank’s policy-making body repeated that benchmark interest rates remain unchanged near zero, set at 0.10% back in March while maintaining its bond-buying program at a current pace of $120 billion per month until “substantial further progress” in employment and inflation goals.

Following the FOMC meeting, the first since Democrats took control of the Senate in early January, Powell told a press conference Wednesday that it would take “some time” to achieve this threshold. “The whole focus on exit is premature,” he said.

Powell’s remark pushed yields on 10-year Treasuries just above 1% while the US dollar advanced to 90.8. Gold remains under $1,850 per ounce. Meanwhile, the S&P 500 saw its steepest drop of 2.6% since October amidst the concerns that stocks are getting overvalued.

While the Chair didn’t comment on GameStop, he has little concern about the stock prices on the up mode. “Financial stability vulnerabilities overall are moderate,” he said. And although the Fed can raise rates to head off a stock market bubble theoretically, that’s not something the Fed has ever done or plans to do, he added.

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